My 10-Point Plan for Fairness
Attached to Danny Alexander’s interview with Matt Chorley in today’s Independent on Sunday (scroll down) is “Taxing ideas: Ten ways to make Britain a fairer place”, which has my name on it.
I should perhaps point out that, as a Blairite, I don’t advocate these measures (except nos 3, 6, 7, 8 and 10). But I do feel uneasy about the Polly Toynbee Principle. Toynbee (right) pointed out on BBC1 Question Time last week that as a well-off person, earning less than £150,000 a year whose children had left home, the Spending Review had left her “untouched”. Actually, I think she has lost out on the state pension age and has overlooked the 1 per cent National Insurance rise coming in next year. But she has a point.
Anyway, the editor wanted to know what could be done to take more from the better off, so I provided a list of what I thought was realistic. The interesting point is that few measures raise significant amounts of money, but in the age of austerity they might have symbolic value. Here they are:
1. Wealth tax
Either a one-off or an annual levy. The French “solidarity” tax, levied on assets over €790,000 (£700,000), raises €4.5bn (£4bn) a year. The case against is partly that the burden would tend to fall on the middling rich, as the best-advised move assets abroad and use trust law. Variants include a mansion tax on homes worth more than £2m, as proposed by Vince Cable and David Miliband, or charging capital gains tax on the sale of the main home, raising huge sums.
2. 60p top rate of income tax
Our ComRes poll last week found 54 per cent support for raising the top rate of income tax, on earnings above £150,000 a year, from 50p in the pound to 60p. It wouldn’t raise much. The sainted Institute for Fiscal Studies says “there is little scope for more revenue to be raised by increasing this rate” as the rich defer income or convert it into capital gain. Maybe, but the scope for sending a powerful signal about the highest paid, including the recipients of large cash bonuses, being “in this together” is considerable.
3. Abolish non-dom status
America doesn’t tolerate it: if you are a US citizen or work there, you pay tax there. Labour brought in a flat £30,000 annual fee payable by the 120,000 non-doms, but why do we need this curious status at all? The highly mobile international elite seems to quite like living in New York, Paris and elsewhere. Again, not much net revenue would be raised, because some would probably move.
4. The Sir Philip Green device
Sir Philip, boss of Topshop and government adviser on waste, holds almost all his assets in his wife’s name. She is resident in Monaco and pays no UK taxes. Would it be possible or desirable to reverse the independent taxation of married couples and to renegotiate the tax treaty with Monaco? Has anyone even tried? Again, the net benefit to the Exchequer is small, but the index once proposed by David Cameron of National Well-Being would rise.
5. Robin Hood tax on banks
The coalition is imposing a bank levy next year that will raise £2.5bn a year. To raise more would preferably mean negotiating a global agreement so that all countries did it. Tricky. But Alan Johnson, the Shadow Chancellor, last week argued that another £3.5bn could easily be raised from the banks without driving them out of the country.
6. Raise tax on betting
If financial transactions were taxed, it is argued, speculators will simply move into the betting markets. The betting tax has been replaced by a tax on bookmakers, but is not collected from internet bookies based overseas. This is a loophole that could be closed. It would raise millions – chicken feed in deficit terms but important in blocking off another form of tax avoidance.
7. Tax universal benefits
Free eye tests, free prescription charges, free bus passes, free TV licences for the over-75s and winter fuel payments for pensioners could all be subject to income tax, although that would mean breaking Mr Cameron’s election promises. Taxing these benefits would raise less than £1bn, but would again be a symbol of fairness.
8. Tackle tax havens
Large companies continue to minimise their tax bills by basing operations in holiday resorts. Can it really be so difficult to make that harder for them?
9. VAT at 25 per cent on luxury goods
From 1975 to 1979 there was a 25 per cent rate of VAT on “luxuries”, including white goods, jewellery and furs. Now, 25 per cent happens to be the maximum allowed under EU rules. It could apply to yachts, fur, patio heaters, 4×4s and football clubs. If a 10th by value of all currently VAT-chargeable goods and services were classified as luxuries, it would raise £2.5bn a year.
10. Abolish pension contribution relief at higher rates
This old Liberal Democrat policy is being partially enacted by the coalition – limiting the benefit to £50,000 a year from next year and to a pension fund total of £1.5m from 2012. But the relief could be restricted to the basic rate of income tax for all. This would hit the well-off but not the richest, between the 40p tax threshold at £44,000 a year and the 50p rate at £150,000 a year. This would raise about £1.5bn a year.Tagged in: redistribution
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