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Increased taxation for the older generation?
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philip gosling
Posted: 13 December 2020 11:20:36(UTC)
#344

Joined: 06/01/2013(UTC)
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Easyrider;140821 wrote:
I also can't see a Conservative Government introducing a specific new tax called a wealth tax although I can envisage a Labour or a Lib-Lab alliance doing so.
There are bunches of low-lying fruit which could be more readily picked: restricting tax relief on pension contributions to the standard rate; introducing a ceiling on the value of ISA holdings; increasing inheritance tax (which is a quasi- wealth tax); increasing Council tax on expensive properties (which is a quasi-wealth tax); increasing transactions taxes on expensive goods and services such as expensive cars, expensive houses, stocks and yachts (which is a proxy wealth tax); and of course increasing income tax (say 80% on incomes over £0.5k.
The latter won't raise much money but would go down well politically.
IMO some form of wealth tax is inevitable given the huge disparity of wealth in this country which has been accentuated by quantitative easing, and the possible limited scope to increase revenue by raising income tax, which could be subject to diminishing marginal returns.
With regard to the older generation, as they are the major consumers of health services provided by the NHS, there must be the possibility that they may be required to pay NICs after retirement, which would effectively raise their standard tax rate.


Comment
But with acceptance in mainstream economics of MMT there is no need for tax increases and as Boris promised billions of savings once we are out of the EU we must be fine surely ?- all those import taxes on champagne, BMW, olive oil, Flowers, Bacon, Wine etc
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Tim D
Posted: 20 December 2020 21:41:09(UTC)
#347

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Via Monevator's links... an interesting read on the Wealth Tax Commission report
https://firevlondon.com/...l-be-taxing-for-tories/

First bit is just about how it'd affect them personally; but starting further down the page at a big bold "However, these proposals will not be enacted. They miss both the economics and the politics" heading there's a nice analysis of how it'll never fly politically, and what will actually get taxed instead.
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J Thomas on 20/12/2020(UTC)
Tim D
Posted: 20 December 2020 22:25:53(UTC)
#345

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philip gosling;141417 wrote:

Comment
But with acceptance in mainstream economics of MMT there is no need for tax increases and as Boris promised billions of savings once we are out of the EU we must be fine surely ?- all those import taxes on champagne, BMW, olive oil, Flowers, Bacon, Wine etc


On that last point...

This is something I've been wondering about. What is the impact to the exchequer from the new "UK Global Tariff" regime? It seems unlikely it's not been examined in some detail, although obviously there'd be huge assumptions/guessing needed around
- No deal vs FTA with the EU.
- How elastic demand is in response to changing tariff rates.

But the only thing I can find even close is a statement on the 20th of Nov.
Quote:
The Office for Budget Responsibility (OBR) will publish a final estimate of UK Global Tariff (UKGT) tariff revenue at the next fiscal event.

Answered by Department for International Trade at https://questions-statem...etail/2020-11-11/114092
I'd have thought "next fiscal event" should have been the spending review on the 25th... but if there's anything out there I can't find it.

I note the government's own comments on the UKGT largely revolve around how much cheaper it'll make stuff for consumers (food, cars and ceramics excepted): https://www.gov.uk/gover...usinesses-and-consumers

Update: Aha, buried in the middle of https://ukandeu.ac.uk/th...llors-budget-statement/ I find:

Quote:
Some have suggested that one of the benefits of a no-deal Brexit is that those tariffs will provide the Exchequer with a slug of revenue, at the expense of UK consumers who would be paying higher prices in the shops (the ultimate stealth tax).

But the OBR notes that the projected £6bn in additional annual tariff revenue is more than offset by the impact on revenues from the reduction in GDP and so borrowing would be higher by some £11-12bn in the next three years.


(so that'd be £6bn from the "champagne, BMW, olive oil, Flowers, Bacon, Wine" which would be tariff free currently/with a deal).

... and then that leads me to http://cdn.obr.uk/CCS102...O-v2-Web-accessible.pdf ; the £6bn is mentioned in annex B.17's "no deal" scenario, and the GDP reduction in B.18.
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J Thomas
Posted: 20 December 2020 22:28:52(UTC)
#348

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Tim D;142612 wrote:
Via Monevator's links... an interesting read on the Wealth Tax Commission report
https://firevlondon.com/...l-be-taxing-for-tories/

First bit is just about how it'd affect them personally; but starting further down the page at a big bold "However, these proposals will not be enacted. They miss both the economics and the politics" heading there's a nice analysis of how it'll never fly politically, and what will actually get taxed instead.


Some interesting perspective in that article. Although he does makes me feel rather poor, with the assumption one is only really wealthy with a minimum of £10 to £15 Million of debt free assets.
However, I do totally agree with the author regarding foreign withholding tax on dividends. It has long annoyed me I must pay a 15% withholding dividend tax on my Apple and Microsoft shares to the US Treasury, who also remember harvest all your personal data via their W8-BEN forms, yet foreign holders of UK listed equities do not pay anything on dividends.
That is an easy £5 Billion plus a year for HMRC to collect at source, with no votes lost as the holders live overseas.
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Tim D on 20/12/2020(UTC), Guest on 21/12/2020(UTC), huudi on 21/12/2020(UTC), andy mac on 21/12/2020(UTC)
Tim D
Posted: 08 January 2021 09:06:02(UTC)
#349

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Some comments from the director of the IFS recently, apparently in response to the "Wealth Tax Commission"'s report:

Quote:
We have a series of taxes on wealth or things close to wealth – tax on pensions, council tax, inheritance tax, capital gains tax. The first priority should be to sort these out. They are all badly designed and could be made more efficient and more equitable and raise more money, though not vast amounts more.
...
People often mean very different things by wealth taxes. Most of us have most of our wealth in houses and pensions. Do we want to catch millions in a tax on their house and pension? If not, it's hardly fair to tax people who have money saved in other ways. Or do we just want to get at the wealth of the really wealthy? If so, how wealthy? And how do we stop them avoiding it?


Reported at https://www.thisismoney....m-Rishi-Sunak-told.html ; not sure where they were originally (couldn't find anything on the IFS site).
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dd on 08/01/2021(UTC)
dd
Posted: 08 January 2021 11:03:18(UTC)
#350

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What baffles me is the definition of wealth. Here is a simple example to illustrate the point of principle. The numbers are not intended to be perfect. Interested to hear comments on the principle:

- Person A:
Income in retirement of say £30,000 from a DB pension;
(Nominal amount required to generate that = £1,050,000);
£30k taxed as income because that's what it is and there is no pot.

- Person B:
Funds amounting to £1,050,000 in DC pensions; from which
income of £30,000 is generated;
£30k taxed as income - okay so far, but:

Is there a proposal to *also* tax the £1,050,000 pot as wealth, because it is sitting in a pot or two and owner must therefore be defined as wealthy?

*If that is the case, will the nominal pot of Person A also be taxed, or will they be exempt?*

**************************************************************

Maybe more commonly, people will be:

- Person C:
Funds amounting to £210,000 in DC pensions, from which
income of £6,000 is generated;
£6,000 taxed as income (if other income such as SP exists);
Pot of £210,000 may escape a wealth tax - okay.
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Andrew1952 on 18/01/2021(UTC)
Vind
Posted: 08 January 2021 14:17:13(UTC)
#351

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I think there was something in the report that covered DB pensions.

Converting to a cash equivalent value is an established practice for things like divorce so it is not too much of a leap to apply something similar.

On a separate but related note, there has been talk of hardening the valuation calculation for DB pensions in relation to the Lifetime Allowance. Not sure it's progressed much, but there was talk of increasing the multiple of pension upwards from 20x.

Bottom line is, there are established methods of "converting" DB benefits to cash and I think the intention was to include them should pensions be included in a wealth tax.
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dd on 08/01/2021(UTC), Tim D on 08/01/2021(UTC), Laura Sommer on 12/01/2021(UTC)
Laura Sommer
Posted: 12 January 2021 12:40:48(UTC)
#356

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It would be harsh to include pensions in a wealth tax because the income is already subject to taxation. DC pensions are already precariously linked to the stock market so not guaranteed. If a person's main wealth is tied up in it, they could face a double whammy of taxation (income tax + wealth tax) from the extra unforseen withdrawal.

And those with wealth tied up in DB pensions might have to remortgage or take out a painful loan due to lack of liquidity. It seems like confiscation as the proposal to start at a mere £500,000 is barely middle class, especially in the South East. Many middle income individuals could have well above this level if their principal residence and pension are taken into account.

There would also be expensive accounting/valuation costs to prove compliance which could run into annual fees in the thousands. I know this because of once having to file annual tax returns to the IRS before renouncing my U.S. citizenship...the condors would be rubbing their hands in glee!! >:(

It seems more reasonable to cap or even cancel ISA wrappers as this would be more disposable.

They could prevent the rich from fleeing with their wealth by capital controls or introducing an exit tax. We could even introduce citizenship-based taxation like that used in the U.S. so that expats would still be subject to UK taxation. All awful, but we're in desperate times. :/

I don't object to a wealth tax per se but it should come in at a higher level. Of course it will always be a relative situation. In the U.S. they are considering wealth taxes north of, say, $10 million which seems more reasonable. It wouldn't create hardship at that level.

We would be hard-hit under the proposals because though my spouse only has about £14,000 coming in from his local government pension, it would probably be worth close to half a million as a transferable lump sum. Our flat would be worth over £400000 on the open market with a full 99 year lease but we have only about 50 years left so it's a depreciating asset. So on paper my husband would be hit hard in spite of not being liquid. We'd probably have to sell our place which would be a disaster as we'd be too old to remortgage. It's causing me sleepless nights :O
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Guest on 12/01/2021(UTC), SimonHughes on 13/01/2021(UTC), Easyrider on 16/01/2021(UTC), dd on 18/01/2021(UTC)
Easyrider
Posted: 16 January 2021 13:12:33(UTC)
#358

Joined: 09/11/2020(UTC)
Posts: 1,951
Perhaps the "solution" will be falling life expectancy combined with longer working lives? If, on average, people have to work to make ends meet until, say, they are 65 and then, on average, pop off at 67, the problem is solved.
That's the way it used to me in the 'sixties.
Both trends - falling life expectancy and longer working lives - are already evident. All the Government has to do is to make early retirement less attractive and achievable and perhaps Covid will do the rest?
The longer-term health and longevity implications of catching Covid-19 when one is young might be considerable.
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Luca Brasi
Posted: 16 January 2021 13:57:28(UTC)
#359

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Easyrider;146867 wrote:
Perhaps the "solution" will be falling life expectancy combined with longer working lives? If, on average, people have to work to make ends meet until, say, they are 65 and then, on average, pop off at 67, the problem is solved.
That's the way it used to me in the 'sixties.
Both trends - falling life expectancy and longer working lives - are already evident. All the Government has to do is to make early retirement less attractive and achievable and perhaps Covid will do the rest?
The longer-term health and longevity implications of catching Covid-19 when one is young might be considerable.


About 20 years ago I was having a conversation about pensions with someone who worked in the HM Dockyard pensions department, even to this day it still saddens me when he told me that the average draw on a dockyard pension was 3 years.
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3 users thanked Luca Brasi for this post.
Easyrider on 16/01/2021(UTC), Laura Sommer on 18/01/2021(UTC), Sheerman on 18/01/2021(UTC)
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