Why we need "Net zero"

[Beelbeebub]

9 hours ago, SteamyTea said:

Why I think we should just have two taxes.

One on individual income, and the other a 'sin' tax.

Though there would be huge disagreement on what is considered a sin.

 

And what's considered an individual's income!

[Beelbeebub]

25 minutes ago, BotusBuild said:

You've missed the point of what was being proposed (not by me I should point out - refer to post). You imply there would be multiple taxes. One single rate, applied in different ways. Income tax, Sales Tax, Profits Tax etc, etc, etc.

Sorry I don't follow?

 

Are you (or the op) saying there should one tax (let's say income tax) at a flat rate and no vat, no sales tax, capital gains tax, no IHT just individual income 

 

or that there should be multiple taxes but each one has exactly the same rate eg income tax is 20%, vat is 20%, capital gains tax is 20% and so on?

[SteamyTea]

17 minutes ago, BotusBuild said:

What would the single rate be

That seems tricky on the face of it.

It would have to take in many factors such as growth, inflation, behaviour change etc.

I have not looked at the recent figures but seems to remember that about 40% of the countries GDP is taken as taxes. So about £1tn/year. I may have to look that up again as it was nearly 20 years ago I studied economics.

Most of the taxes are income tax, NI and VAT.

 

So under my system we could tax all incomes at just under 40% and fill in the gaps with my 'sin' taxes.

[SteamyTea]

6 minutes ago, Beelbeebub said:

And what's considered an individual's income!

Every payment they receive.

So if you go to work, and earn £1600/month, £400 goes in tax.

If you rent a room, or house out, 40% goes.

If you sell your car, a painting, your home, 40% goes (consider that a wealth tax).

But you won't be paying a lot of secondary taxes like VAT, fuel duties, inheritance taxes, council tax, NI, 'net zero', etc.

 

Would make central government much more accountable as it would show how well they can spend our money.

 

[Beelbeebub]

31 minutes ago, BotusBuild said:

 

If its a sales tax, yes.

Every business, no threshold.

You wouldn't

With no threshold, this is a moot point.

Ok so you're suggesting VAT/sales tax on every single business with ability no exemptions?

 

This is fine - I believe the French have no threshold and vat exemptions are much less common in Europe anyway.

 

But then you get into discussions about what exactly is a business?

 

How does sole trading work? How do you capture the guy doing an odd job for a neighbour and getting paid to cover materials?

 

Do I have to charge vat on selling my CDs on eBay?

 

Vat on selling your car privately?

 

Vat when you sell your house?

 

The reporting requirements around vat are pretty onerous already - is applying that t{ every single transaction between every single individual really the way to reduce complication and administrative burdens?

 

I'm just saying that simple taxes never stay simple.

 

Every single time you will need to make some sort of exemption or rule to stop your tax having undesirable effects.

 

And those are where the loopholes come in.

[Beelbeebub]

7 minutes ago, SteamyTea said:

Every payment they receive.

So if you go to work, and earn £1600/month, £400 goes in tax.

If you rent a room, or house out, 40% goes.

If you sell your car, a painting, your home, 40% goes (consider that a wealth tax).

But you won't be paying a lot of secondary taxes like VAT, fuel duties, inheritance taxes, council tax, NI, 'net zero', etc.

 

Would make central government much more accountable as it would show how well they can spend our money.

 

Right 

 

So I've just had some rewiring done.

 

Electrician charged me £800 and provided wire, consumer unit, sockets etc.  total value around £500

 

I pay him £800 and he has to pay £500 to his wholesaler and £320 to HMRC (40% tax).  He has now lost £20 for his day's work.

 

If I were to buy the parts directly for £500 and give them to him and he charge me £300 he'd only have to pay £60 in tax and make £240.

 

every single trade would become labour only.

 

Every shop would have to mark up all goods by at least 40% even if they were simply a warehouse/wholesaler.

 

Every single step in a chain will add 40% to the price so a lump of brass for £10 become £14 when it is sold to the machinist, he has to sell that £20 just to break even to the cabinet maker.  He in turn has to price that part at £28 to the kitchen show room.  They then have to charge that at £40 to the kitchen fitter who charges his client £56 for that brass handle.  And that assumes nobody charges anything for their time and overheads that's just the material cost moving through the chain!

 

[SteamyTea]

14 minutes ago, Beelbeebub said:

every single trade would become labour only.

 

Yes. Why would that be a problem?

14 minutes ago, Beelbeebub said:

Every single step in a chain will add 40% to the price so a lump of brass for £10 become £14 when it is sold to the machinist, he has to sell that £20 just to break even to the cabinet maker

Yes, but the prices of goods and running a factory would be reduced.

Also, the taxes would only be claimed on the workers wages i.e. like income tax is now.

Edited 16 hours ago by SteamyTea

[Beelbeebub]

Are you proposing *only* to tax wage payments to individuals?

 

Ok if I work for a shop and they pay me £1,000 a month I pay £400 of that to HMRC

 

What if I form a company that provides my labour to another company? Is that taxed?  That company pays me a wage of £1 a month and I pay 40p to HMRC. The company provides a house, car, clothes and food for me for free.

[-rick-]

Well this got super off topic. But as a master of asides I will join in! *ducks*

 

Sales tax/VAT is quite a regressive tax so I'm not hugely in favour. I tend to think that in a digital age (where most transactions are done electronically) we could radically reshape our system. Make bank accounts be marked with a flag that denotes the type of account (I'm sure this already exists but I mean a UK wide standardisation and make this flag part of the transaction).

 

Hugely simplifying, an account can be owned by a person or a company(*). Payments from a company account to a personal account have tax deducted at the time of transaction at the rate of that taxpayer (based on annual income). Other transactions are tax free. It is illegal to derive personal benefit from a non personal account (similar to existing benefit in kind rules). Payments to/from foreign (unmarked) accounts treated as payments to personal account and taxed (allowance for international agreements for tax free transactions to jurisdictions with compatible laws though clearly starting with zero). Possibility of claiming tax back in exceptional(*2) cases. Mechanism for refunds automatically refunding the deducted tax (basically need to enter original transaction ID at time of refund, or request refund using online banking that is then confirmed by company).

 

Likely need an annual land tax also, but these two taxes can cover a wide range of existing taxes. Exceptions and incentives can be created but they are created on the basis of having to claim the tax refund, rather than having a lower tax bill. Claims should be digital and easy to claim (possibly directly through the online banking transaction record).

 

(*) there may be more categories with special rules but they should be limited

(*2) exceptional sounds wrong here, there are going to be many cases where you want to claim a refund, but the key is that these are rare overall given the total number of transactions

 

Edit: companies would still have some additional taxes in some industries (carbon tax?) and need to file tax returns in many cases. But amount of work involved significantly reduced. Individuals much less likely to need a tax return. Individual (automated) tax refunds possible on specific transactions avoiding need for end of year return.

Edited 15 hours ago by -rick-

[Mike]

  

1 hour ago, Beelbeebub said:

I believe the French have no threshold

It probably depends on the business type :)

 

Micro-Entreprise, Entreprise Individuelle, SARL (Société à Responsabilité Limitée), EURL (Entreprise Unipersonnelle à Responsabilité Limitée), SAS (Société par Actions Simplifiée), SASU (Société par Actions Simplifiée Unipersonnelle), SA (Société Anonyme), SNC (Société en Nom Collectif), SCS (Société en Commandite simple), SCI (Société Civile Immobilière), SCP (Société Civile Professionnelle), SCM (Société Civile de Moyen).

 

 

[Beelbeebub]

31 minutes ago, -rick- said:

Well this got super off topic. But as a master of asides I will join in! *ducks*

🤣

 

31 minutes ago, -rick- said:

Sales tax/VAT is quite a regressive tax so I'm not hugely in favour

Isn't that analysis based just a testament that poor people don't have much spare money?

 

(I'll ignore zero rated vat for now)

 

Poor person earns 1k a month and spends all of that on stuff that is 20% vat - has paid £200 in vat ie 20% of income

 

Rich person earns 100k a month and spends half of that on stuff at 20%vat - has paid £10,000 in vat ie  10% of their income

 

This forms a core part of the argument for lower vat rates (or even zero) on certain products 

 

Poor people spend a lot more of their income on food, energy etc than rich people so the argument goes well should lower rate it. Likewise kids clothes and other things 

 

Nobody would claim vat on mink coats, gold watches and diamond tipped canes is a regressive tax on the poor.

 

But if we lower vat on food, that means we lower the tax on fillet steaks, caviar and fois gras.  

 

Then we have the difficulty of restaurants. Charging vat on restaurants but not food, but where is the line between a restaurant serving meals and a shop selling food? 

 

If a pizza in a restaurant is Vat is a frozen pizza you cook at home vat free? What about a pizza base, block of cheese and a jar of topping? Take away?

 

It all gets complex fast 

 

Your simplification already has multiple get outs and exemptions ....

 

45 minutes ago, -rick- said:

illegal to derive personal benefit from a non personal account

What is a personal benefit? Is having physio a personal benefit or good employee care? Is providing tea and coffee in the break room a benefit or good practice?  Does your work van need leather upholstery, a second row of seats and alloy wheels? If you are a plumber probably not, a taxi driver then definitely but what if you are a builder who has 3 labourers?

 

51 minutes ago, -rick- said:

Likely need an annual land tax also,

I am skeptical of land taxes because when it was conceived in the 1800's USA land was through basis of all wealth. You farmed it or mined it or did some thing that needed space or it's proximity.

 

But now alot of our economy is unteathered from land. Google probably owns less UK land than lidl yet has orders of magnitude more revenue and profit.

 

How does a land tax capture JK Rowlings  value and income?

 

I have wondered about inflation as a tax.

 

Government issues currency and the purpose of tax is to drain off that currency so we don't have hyper inflation

 

If the government didn't tax anything and the money entering the economy was larger than the goods and services in that economy we get inflation.  So taxes draw off that extra money.

 

Inflation is basically the thing that adjusts the fiat money to the real economy.

 

And it's bad because it destroys savings and makes you stealth poorer.

 

But what if you drew the extra money away as a very small % of transactions- basically a card fee.

 

As there is a link between volume of transactions and GDP the two would scale together.  

 

It would be like every £ issued is slowly wearing away with each "use" (transaction).

 

Ironically not a million miles from steamy teas suggestion 🤣.... Though the (I think) critical difference would be the "tax" would be on every single transaction and being very small (I don't (now what level it would need to be to work and if that level would{d be so high as to stop it working).  This would make cash (which doesn't "wear out") very attractive.

 

But maybe it could work as a digital only currency. People are very comfortable now with bit coin and the like that has never had a physical existence. 

[SteamyTea]

6 minutes ago, Beelbeebub said:

It would be like every £ issued is slowly wearing away with each "use" (transaction)

I think that has been tried out.  You get issued with a monthly currency that becomes worthless at the end of the month.  (expletive deleted)ing stupid idea.

7 minutes ago, Beelbeebub said:

But maybe it could work as a digital only currency

Bitcoin is limited to 21 million coins (until it isn't) and a new coin is issued about every ten minutes (I think).

What would happen if a digital currency was fixed volume from the start i.e. a crypto£ had 4 trillion issued tomorrow (so close to the value of a £ that is currently in circulation at the moment).

 

There is an economic theory that money has to keep moving (what the 2008 banking crisis was about, in part).  Money in Circulation, or Money Supply, if fixed may have some strange side effects, but not really sure what they would be (maybe Monopoly is a good example).

[-rick-]

40 minutes ago, Beelbeebub said:

Isn't that analysis based just a testament that poor people don't have much spare money?

 

Yep. AFAIK the way you decide a tax is progressive/regressive is to see what overall percentage of income the tax takes, not the headline rate. If the tax takes a greater percentage of income from poorer people then the tax is regressive and there are likely better ways to extract the same amount of money. (assuming you want either a income neutral tax or a progressive tax).

 

I like the nordic idea of fines being a proportion of income vs our system of fixed penalty. Seems much fairer. A speeding/parking ticket for a minimum wage person is much more impactful than for a millionaire.

 

40 minutes ago, Beelbeebub said:

But if we lower vat on food, that means we lower the tax on fillet steaks, caviar and fois gras.  

 

Then we have the difficulty of restaurants. Charging vat on restaurants but not food, but where is the line between a restaurant serving meals and a shop selling food? 

 

If a pizza in a restaurant is Vat is a frozen pizza you cook at home vat free? What about a pizza base, block of cheese and a jar of topping? Take away?

 

In my system none of this gets taxed. Income taxes are higher to compensate. Capital gains is significantly different (if it exists at all). The richest people in this country often pay the lowest tax rate (not raw £) of everyone because a lot of their income is from capital not work. Remove that difference (in the main) and you get some very interesting results. (I'm not saying my proposal is an easy sell -- I believe it would seriously reduce bureaucracy but would also disadvantage a lot of the richest and the white van man tax avoiders who tend to have a significant political influence).

 

40 minutes ago, Beelbeebub said:

That is a personal benefit? Is having physio a personal benefit or good employee care? Is providing tea and coffee in the break room a benefit or good practice?

 

Almost all taxable. As it is today (or rather as it was when I last looked a decade or so ago, rules may have changed). My last company gave me all sorts of benefits but also paid benefit in kind tax on those benefits as if I'd earned the money directly.

 

40 minutes ago, Beelbeebub said:

Does your work van need leather upholstery, a second row of seats and alloy wheels? If you are a plumber probably not, a taxi driver then definitely but what if you are a builder who has 3 labourers?

 

Leather? Alloy? For a work van? No. More seats can be justified. If providing a service and the luxuries are for the use by clients then that's potentially different. I'm not sure of the existing rules here but setting rules in this area is not different from what we do now. Businesses have to deal with this already, my proposal doesn't change that.

 

40 minutes ago, Beelbeebub said:

I am skeptical of land taxes because when it was conceived in the 1800's USA land was through basis of all wealth. You farmed it or mined it or did some thing that needed space or it's proximity.

 

But now alot of our economy is unteathered from land. Google probably owns less UK land than lidl yet has orders of magnitude more revenue and profit.

Sure. But council tax is worse. And maybe I should have said 'property tax' rather than land tax. (I'm very much not a fan of a land tax in our current system and it has issues in general, however, I gave it as an example of something that might be needed in this new theoretical system for it to be cohesive, there are likely other options too).

 

40 minutes ago, Beelbeebub said:

How does a land tax capture JK Rowlings  value and income?

 

It doesn't but it's not meant to. She has an income (likely mostly structured as capital gains rather than income tax). Tax her at the income tax rate.

 

40 minutes ago, Beelbeebub said:

If the government didn't tax anything and the money entering the economy was larger than the goods and services in that economy we get inflation.  So taxes draw off that extra money.

 

Inflation is basically the thing that adjusts the fiat money to the real economy.

 

And it's bad because it destroys savings and makes you stealth poorer.

 

But what if you drew the extra money away as a very small % of transactions- basically a card fee.

 

As there is a link between volume of transactions and GDP the two would scale together.  

 

It would be like every £ issued is slowly wearing away with each "use" (transaction).

 

To me this is much more of a hidden tax. I'm generally against frictional taxes. Far prefer to have simpler, easy to understand, in your face taxes. If everyone (even idiots) can understand the taxes and understand that everyone pays them then social cohesion will be higher.

 

Not done the maths, but if you remove the ability for rich people to pay less taxes by structuring their finances differently then I expect the headline tax rates go down.

 

In summary, what I proposed, is not a summary of all taxes, but a reform of a subset. In my thinking it eliminates a lot of paperwork for the less weathy (<£1million) and smaller companies while preserving flexibility for incentives where needed (though the overall system is thought of as a way of reducing overall costs and therefore the need for incentives).

 

One thing I didn't mention before is that there would have to be a limit of transfers between personal accounts (normally tax free) and transfers to cash (if it still exists in this system).

Edited 13 hours ago by -rick-

[Beelbeebub]

10 hours ago, SteamyTea said:

I think that has been tried out.  You get issued with a monthly currency that becomes worthless at the end of the month.  (expletive deleted)ing stupid idea.

That would be money decay by time - effectively inflation. It does incentivise spending quickly rather than saving because it effectively prevents saving.

 

I was suggesting money decay by use.  Your £ can sit in the bank forever and not lose value.

10 hours ago, SteamyTea said:

Bitcoin is limited to 21 million coins (until it isn't) and a new coin is issued about every ten minutes (I think).

What would happen if a digital currency was fixed volume from the start i.e. a crypto£ had 4 trillion issued tomorrow (so close to the value of a £ that is currently in circulation at the moment

I wasn't suggesting a bitcoin copy (I have many issues with bitcoin) just illustrating that a digital only currency is possible. Our current £ is becoming more and more digital, I barely use cash now and there are plenty of places that are no cash.  The card fees are now equivalent or lower than using cash for a business.  Maybe if the UK (or EU and UK) set up an equivalent of MasterCard or visa, that had card fees lower than both but the fees went to the respective treasury.  You could even imagine two fees one to your treasury and one the merchants so buying a crepe in Paris would send some tax to the UK and some to France but pie and mash in London would send both sets to UK.

[Beelbeebub]

10 hours ago, -rick- said:

10 hours ago, Beelbeebub said:

Isn't that analysis based just a testament that poor people don't have much spare money?

 

Yep. AFAIK the way you decide a tax is progressive/regressive is to see what overall percentage of income the tax takes, not the headline rate. If the tax takes a greater percentage of income from poorer people then the tax is regressive and there are likely better ways to extract the same amount of money. (assuming you want either a income neutral tax or a progressive tax).

It's very difficult to eliminate every regressive tax.  What is most important is the overall tax burden (including benefits). You could (for example) make the vat tax less regressive if you provided a low income benefit that approximately canceled out the vat.

 

Despite the 'vibes' the UK tax system is progressive overall (could it be better? Absolutely, but it isn't regressive)

 

 

[Beelbeebub]

10 hours ago, -rick- said:

my system none of this gets taxed. Income taxes are higher to compensate. Capital gains is significantly different (if it exists at all). The richest people in this country often pay the lowest tax rate (not raw £) of everyone because a lot of their income is from capital not work. Remove that difference (in the main) and you get some very interesting results. (I'm not saying my proposal is an easy sell -- I believe it would seriously reduce bureaucracy but would also disadvantage a lot of the richest and the white van man tax avoiders who tend to have a significant political influence).

I would definitely be in favour of CGT tweaks to make it more comparable to income, but I can see how it would be much more complicated than the "x% of the profit" we have at mo.  Ideally it would be the profit amortised over the years held and taking account of inflation.  But then you need the past earnings to work out if that equivalent income took you over the higher rate thresholds etc.  it all gets complex fast - which is my point 

 

One tweak I would definitely do is equalise the CGT rate with IHT, or effectively make IHT into capital gains tax.  When you hear about the amount of IHT avoided what isn't always clear is that it is avoided by transfering before death which incurrs CGT, which is lower. 

 

On IHT I would allow people to "pre pay" IHT before they die with some sort of account you can pay taxes to and then can be out against your IHT bill when you die.  This helps reduce the issue where the lump sum (or 10 year spread) is the issue rather than the overall amount.  It would also provide a forward revenue stream for the government now.

 

 

[Beelbeebub]

10 hours ago, -rick- said:

Leather? Alloy? For a work van? No. More seats can be justified. If providing a service and the luxuries are for the use by clients then that's potentially different. I'm not sure of the existing rules here but setting rules in this area is not different from what we do now. Businesses have to deal with this already, my proposal doesn't change that.

Yup.

 

Leather is a very hardwearing and easy to clean finish.  Makes it easier to clean after I get in wearing muddy trousers guv....

 

It was getting bad - crew cab pickups in particular - that HMRC has clamped down really hard.  Now anything with a 2nd row of seating is considered a company car and taxed appropriately.

 

This actually affects me as my preferred work vans are converted people carriers with all (including the front passenger) seat removed.  This is now considered a company car, so will have to go when the transition period ends.

 

But I can see why it had to be done. There are loads of builders wives driving the kids to school in souped up pickups with a tow bar (never used) and tiny roof rack clearly claiming them as work vehicles despite the fact they are crap as work vehicles and never haul anything bigger than a fold up pram.

 

I've had plumbers turn up in sign written crew transits with kids seats in the back.

[Beelbeebub]

10 hours ago, -rick- said:

doesn't but it's not meant to. She has an income (likely mostly structured as capital gains rather than income tax). Tax her at the income tax rate

I assume she has royalties and advances as her primary income plus however she has her savings invested - stocks and properties I imagine.

 

But again writers and singers and artist are another example of complexity creeping in.

 

If you had your perfect tax system that taxed everyone progressively on their annual income what do you do with the person who earns £100k in one year (sells painting) and then nothing for 5 years.

 

They should pay the higher rate of tax as a 100k earner but in reality they only earn £20k a year so should be taxed at a lower rate 

 

There are provisions in the current system but it's another example of how taxes become more complex as exceptions are required.  It's very well to say "no exceptions" but they always run up against messy reality.

 

The "pre owned asset" tax was created to stop people giving away their houses to their kids and renting them back for £1 to avoid IHT.  So the rule is you can't ever benefit from an asset you gifted.  If you did the gift is considered never to happen and the IHT bill appears.

 

Great, except this also covered houses you helped buy.  So lots of people who helped their kids with their home are then unable to move into that home when the age and become infirm.

 

So they had to create an exemption for elderly care.  Which opened up a loophole (a financial advisor tried to persuade us to use my father's dementia to to access this loophole - we declined as it seemed very sketchy)

 

There are so interesting ideas here and God knows the tax system is complex and creates all sorts of perverse incentives and opportunities for avoidance (or sometimes inadvertently cruel traps (eg the inteste IHT rules have forced mothers to sue their infant children to avoid all of them being forced out of the family home)

 

But the dream of simplification and cutting red tape is somewhat of a mirage.

[-rick-]

2 hours ago, Beelbeebub said:

It's very difficult to eliminate every regressive tax.  What is most important is the overall tax burden (including benefits). You could (for example) make the vat tax less regressive if you provided a low income benefit that approximately canceled out the vat.

 

Despite the 'vibes' the UK tax system is progressive overall (could it be better? Absolutely, but it isn't regressive)

 

Agree. My proposal wasn't intended as a complete reset to a progressive system. It only touches a part of the system anyway, a lot remains in place without changes or minor changes. I would like to get rid of VAT as it just seems like a huge amount of bureaucracy what in the end is a fairly regressive tax. However, nothing to say you couldn't keep VAT entirely as is within the system I proposed, that's not it's main point. The main point is addressing income/capital gains and tax avoidance associated with those.

[-rick-]

2 hours ago, Beelbeebub said:

I assume she has royalties and advances as her primary income plus however she has her savings invested - stocks and properties I imagine.

 

Sure. Dividends are a transfer from a corporate account to a personal account so are automatically covered by the proposal. (Assuming the shares are held in a 'personal' account - this is an area where there might be more types of account - 'pension' account might be treated more like a company account than a personal account for instance to allow tax free accumulation but taxable withdrawals).

 

Capital gain within an investment account isn't dealt with automatically and issues such as amortising a gain over a number of years, etc, means that this would still have to be dealt with as it is now.

 

2 hours ago, Beelbeebub said:

If you had your perfect tax system that taxed everyone progressively on their annual income what do you do with the person who earns £100k in one year (sells painting) and then nothing for 5 years.

 

I didn't say my system was perfect. I think it's simpler, results in less avoidance and less paperwork for the average person/company. So a better tax yield.

 

As someone who earned a significant salary for a period of a few years and not so much the rest of the time I've definitely paid way more tax than I would have if I had earned that money over a longer period. I don't think there was a system for handling that for my situation (please point me in the of the existing rules if I missed something - I think it's probably too late for me to claim a refund now but would if I could). Again, nothing about the proposed system precludes dealing with this situation. The key is you would pay the tax up front and then claim refunds vs the other way round.

 

2 hours ago, Beelbeebub said:

But the dream of simplification and cutting red tape is somewhat of a mirage.

 

Sure. What I've proposed is not a miraculous thing. Not supposed to replace all the corner cases. It is supposed to make things a lot more automatic, reduce avoidance. Average person on the street would be much less likely to need to deal with a tax return. Small businesses would have less admin (not zero). If you qualify for an exception/refund, claiming that exception can be be done immediately after the transaction in many cases thanks to the linked digital infrastructure.