I had a Eureka moment at the weekend and I’d like to share it with you this merry, March morning.
I was reading about Facebook agreeing to pay more tax in the UK next year. It’s not such a bad deal for them as Corporation Tax here is a competitive 20%, only bettered by Ireland’s 12.5%. It is the Conservative government’s policy to keep Corporation Tax down to encourage inward investment and it seems to be succeeding. Interestingly, this policy may have unintended consequences in the EU referendum.
Next, I read that by lowering the top tax rate from 50% to 45% an extra £8 billion was raised. Actually, this figure is misleading as some tax payers will have deferred paying until the new lower rate came in but nobody is suggesting that lowering the rate has led to lower tax receipts.
Now, consider this. You are aware that personal taxation is derived mostly from National Insurance, VAT and the tax paid by the middle classes; that’s us. The super-rich only pay the tax they have to and no more. What if they, like Facebook, wanted to pay UK tax? Eureka, this is how we can make them queue up to pay tax in the UK.
Leave the current tax bands as they are or, if the chancellor is feeling generous, lower them a bit as he’s going to get a huge increase in revenue if he accepts my modest proposal.
Now, add a new rate for income above, say £250,000: a flat rate of, say, 20%. What’s not to like if you are super-rich? Millionaire tax exiles who live grumpily on little islands will come flooding back to the UK and, incidentally, their expenditure here will do the economy no harm. They will be able to have breakfast in the UK again.