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UK to become Tax Haven

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richlist
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UK to become Tax Haven

#23901

Postby richlist » January 17th, 2017, 7:32 pm

Looks like there's a chance the UK Gov may try to turn the UK into a tax haven by slashing Corporation and other taxes if negotiations fail with the EU.

Is that really a possibility ?

Lootman
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Re: UK to become Tax Haven

#23920

Postby Lootman » January 17th, 2017, 8:24 pm

1nv35t wrote:If you could list in a 10% corporate tax rate state that was the #1 global financial hub (London) ... both deep and broad and with high expertise, with much lighter regulation than both the EU and USA and relatively politically stable, a island (natural sea defences) with strong military might (nuclear capabilities), that has a currency history that dates back to the 750's and a long history of global trade access ... yes its a possibility.

Add to that that it's English speaking, politically stable, has a free press, excellent Universities and well-developed individual and property rights. If only the weather was better . .

1nv35t wrote:Corporate taxes raised something like £40B for the treasury. Halving that due to lower taxation being applied could be offset by significant inflows of new revenue sources.

I would argue that corporations are pass-through vehicles and so it shouldn't normally matter at what rate you tax them, because ultimately only people can pay taxes, not things. So if we had a high rate of corporate tax then either wages would go down, or prices would go up, or dividends would be reduced, or all three.

That said, it's fairly clear that if we, say, abolished corporate tax altogether, there would be a massive flow of inbound capital and enterprise, and that 40 billion would percolate through in other ways.

I have long thought that the Swiss model would work well here. Splendid isolationism.

richlist
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Re: UK to become Tax Haven

#24016

Postby richlist » January 18th, 2017, 7:17 am

Interesting replies.

Let's hope we don't get what we want from negotiations with the EU then.

I'm kinda looking forward to living in a copy of the Cayman Islands......sounds rather nice.

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Re: UK to become Tax Haven

#24100

Postby supremetwo » January 18th, 2017, 11:59 am

Already mutterings of disapproval from the EU hierarchy, who seem to be blind to Monaco and Luxembourg.

Inheritance tax has to be the first to go to really attract the wealth.

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Re: UK to become Tax Haven

#24150

Postby Lootman » January 18th, 2017, 2:41 pm

supremetwo wrote:Already mutterings of disapproval from the EU hierarchy, who seem to be blind to Monaco and Luxembourg.

Inheritance tax has to be the first to go to really attract the wealth.

But would inheritance tax apply for assets held in the UK but belonging to a foreign national?

I would have thought not, at least for financial assets, unless they have or assume UK domicile. With an exception for real property, perhaps.

After all, the point of being a tax haven is to have tax laws and rates that attract foreign capital.

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Re: UK to become Tax Haven

#24253

Postby Wondergirly » January 18th, 2017, 8:48 pm

As this is not a practical taxation question, I have moved this over to the more appropriate place.

W

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Re: UK to become Tax Haven

#29062

Postby GJHarney » February 5th, 2017, 9:10 am

There was some talk from the Tories last year about aiming to cut corporation tax to 15% to match Trumpton's pledge, however interestingly PwC did a survey on that which found that 3 out of 4 companies would not want it to fall below 17% (from its current 20%) due to the further erosion of trust between business and the public in the wake of tax avoidance scandals, and it is notable that when these things are discussed there is very often a lack of political insight around that area.

Brexit does give us the opportunity to discuss a whole range of issues relation to tax and spending and re-calibrate what we do, I agree. But I would start at the other end. What do we want to spend on things like health, education, welfare, social care, pensions and defence? What is the fairest way that this funding can be paid for? How do we create wealth without creating further destabilising inequality and stretching further the massive gulf between rich and poor that now exists in this country?

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Re: UK to become Tax Haven

#29121

Postby Lootman » February 5th, 2017, 5:45 pm

GJHarney wrote:PwC did a survey on that which found that 3 out of 4 companies would not want it to fall below 17% (from its current 20%) due to the further erosion of trust between business and the public in the wake of tax avoidance scandals, and it is notable that when these things are discussed there is very often a lack of political insight around that area.

I'm not sure who you are claiming lack "political insight" there. But to my mind it is those in "the public" who think there is a problem here that lack insight, and it's depressing if businesses genuinely hold back from arguing for lower taxes because they fear some pushback from those people.

I think the main reason the public appear to be in love with the idea of businesses paying more corporation tax is that they believe that means individuals will pay less tax as a result. And that is a total misunderstanding and represents "a lack of public insight".

Like any cost that is pushed onto a business, that cost has to be passed through in some way. If it has pricing power then the business raises its prices. If the price is already as much as the market will bear, then wages will be reduced, hours will be reduced or workers will be fired. If that can't happen than dividends may be cut, hitting the value and income of pension funds.

In each of those cases, we the public end up paying. So I would argue it doesn't ultimately matter whether corporation tax is 40% or 0%. But the value of lower tax rates is that it attracts more business and capital from places with higher tax rates.

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Re: UK to become Tax Haven

#29369

Postby GJHarney » February 6th, 2017, 1:46 pm

Well you can have a theoretical economic discussion on this, or a practical political one. As the thread was about the comments of a politician (May) I took the latter approach Lootman, and whether an economist likes it or not there are political considerations in how you frame taxation of businesses when set against the justified anger of the wider public against those multinationals that have made huge profits but paid little or no tax, and against a backdrop of both continuing austerity, cuts and pressures on things like the NHS and social care while at the same time an increasing gulf between the very rich and everyone else (but in particular of course the poor) that has likely consequences in terms of social cohesion. Brexit doesn't just allow a reassessment of government taxation, but also of government spending, something that May is keen to avoid I think.

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Re: UK to become Tax Haven

#29393

Postby Lootman » February 6th, 2017, 3:11 pm

GJHarney wrote:Well you can have a theoretical economic discussion on this, or a practical political one. As the thread was about the comments of a politician (May) I took the latter approach Lootman, and whether an economist likes it or not there are political considerations in how you frame taxation of businesses when set against the justified anger of the wider public against those multinationals that have made huge profits but paid little or no tax, and against a backdrop of both continuing austerity, cuts and pressures on things like the NHS and social care while at the same time an increasing gulf between the very rich and everyone else (but in particular of course the poor) that has likely consequences in terms of social cohesion. Brexit doesn't just allow a reassessment of government taxation, but also of government spending, something that May is keen to avoid I think.

That's a good summery of a left-wing analysis of the situation. Obviously I have a very different view, and believe that lower tax rates drive business activity and prosperity, which benefit everyone in the UK.

And that's been fairly mainstream thinking ever since Thatcher and Reagan were elected, both slashing tax rates. Even Labour governments did not reverse that, although I feel sure that Corbyn unelectably aspires to that.

Frankly, I thought the debate about tax rates was done and dusted, except in the comment pages of the Guardian anyway.

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Re: UK to become Tax Haven

#30058

Postby UncleEbenezer » February 9th, 2017, 7:42 am

GJHarney wrote: the justified anger of the wider public against those multinationals that have made huge profits but paid little or no tax,

That is precisely what demonstrates that corporation tax has become unfit for purpose. We've heard the reports, some of them look very plausible, and we see that TPTB are unwilling or unable to prevent certain companies using abusive structures. Do nothing and all that'll happen is that more will follow.

Thus phasing it out looks like a very good idea. How (and whether) to replace it is the appropriate question for debate.

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Re: UK to become Tax Haven

#30239

Postby gryffron » February 9th, 2017, 7:57 pm

At 0% tax... every individual incorporates, and sells their Labour via their own personal services company.

People can play the same game as the megacorps, if you make the tax incentives sufficiently attractive.

;)

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Re: UK to become Tax Haven

#30290

Postby UncleEbenezer » February 9th, 2017, 11:22 pm

gryffron wrote:At 0% tax... every individual incorporates, and sells their Labour via their own personal services company.
;)

That already has useful tax advantages, if you can avoid being caught by IR35. It doesn't avoid tax altogether: the tax falls due when you take money out of the personal services company.

I currently work that way. Pay myself national minimum wage on PAYE, and if my company makes any more than that I can take dividends and pension contributions, thus avoiding "National Insurance" but not honest tax. So long as I'm on Basic Rate, that reduces my tax rate from 46% to 20% (dividends up to £5k), 27% (dividends over £5k), or in the case of pension contributions the prevailing rate when I take the pension less 25%.

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Re: UK to become Tax Haven

#30362

Postby gryffron » February 10th, 2017, 11:05 am

UncleEbenezer wrote:1) That already has useful tax advantages, if you can avoid being caught by IR35. It doesn't avoid tax altogether
2) Pay myself national minimum wage on PAYE


1) Indeed. At the moment it only helps a bit. But 0% corporation tax, which was the issue suggested by the previous poster, would swing the decision heavily.

2) You do know that minimum wage is not mandatory for directors? Just in case it helps.

Gryff

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Re: UK to become Tax Haven

#30523

Postby GJHarney » February 10th, 2017, 8:33 pm

1nv35t wrote:Trying to lock down multi-nationals, some of which have more revenues than some countries, is rather futile. Imposes excessive regulations/reporting that multi-nationals can creative account around. Taxing spending (purchase tax) and wages is the more assured means for the Treasury to get its fair share - that in turn lightens the tax burden upon the rest.


The problem with indirect taxation (which I assume you mean by spending tax, VAT for example), is that it is a flat rate tax that hits the poorest hardest even when taking into account the fact that the rich spend more to begin with. So for example, in the UK the bottom 20% of households by gross income spend approx 27% of their income on indirect taxes. Compare that to the top 20% of households who spend only around 15% of their gross income on indirect taxation (despite spending far more), while the respective overall figures including direct taxation is approx 37% for the poorest and 34% for the richest. It is actually even worse for the bottom 10% whose overall tax rate is an astonishing 47% (due to indirect taxation). The logic therefore is that increases in indirect taxation would push an even heavier tax burden on the poor and likely push the effective rate of tax paid by the very poorest in our society to over 50% of their already very low income.

Equally, while taxing wages has far more ability to target appropriately, the richest people do not just derive their income from wages do they? For example, I'm not sure whether the recently deceased Duke of Westminster was paid a wage by the property companies he owned, but if he was it would have been I am sure a tiny fraction of his actual income.

And look what happens when you have a situation where companies are making huge profits and pay very little tax. The fact that the treasury (and as a result our schools and hospitals) lose out has not even benefited the employees of Amazon or Sports Direct has it, and the only 'trickle down' effect in Mike Ashley's Shirebrook gulag has been when pregnant women's water breaks in the toilets after being too scared to take any time off.

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Re: UK to become Tax Haven

#30580

Postby redsturgeon » February 11th, 2017, 9:49 am

UncleEbenezer wrote:
I currently work that way. Pay myself national minimum wage on PAYE, and if my company makes any more than that I can take dividends and pension contributions, thus avoiding "National Insurance" but not honest tax. So long as I'm on Basic Rate, that reduces my tax rate from 46% to 20% (dividends up to £5k), 27% (dividends over £5k), or in the case of pension contributions the prevailing rate when I take the pension less 25%.


If you pay minimum wage of £7.50 an hour for a 37.5 hour week that is £14,625 per annum.

NI is payable above £8164 pa at 12% for the employee and additionally 13.8% by the employer.

To avoid paying NI and still qualifying for pension credits you should pay yourself between £5876 and £8164 per annum.

John

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Re: UK to become Tax Haven

#37260

Postby StepOne » March 8th, 2017, 3:39 pm

UncleEbenezer wrote:So long as I'm on Basic Rate, that reduces my tax rate from 46% to 20% (dividends up to £5k), 27% (dividends over £5k), or in the case of pension contributions the prevailing rate when I take the pension less 25%.


Not any more - 2k limit now on dividends. And probably only another year's grace until the dividend tax rate starts to increase (I would guess).

StepOne

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Re: UK to become Tax Haven

#37264

Postby UncleEbenezer » March 8th, 2017, 3:44 pm

StepOne wrote:
UncleEbenezer wrote:So long as I'm on Basic Rate, that reduces my tax rate from 46% to 20% (dividends up to £5k), 27% (dividends over £5k), or in the case of pension contributions the prevailing rate when I take the pension less 25%.


Not any more - 2k limit now on dividends. And probably only another year's grace until the dividend tax rate starts to increase (I would guess).

StepOne

Damn.

Anyone know a way (proportionate to a one-man business) to shelter my own company in my ISA or SIPP?


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