Wednesday, April 22, 2009

Bye! Don’t forget to write!

Darling accused of prompting British brain drain with tax increase on high earners

Alex Henderson, tax partner at PricewaterhouseCoopers, said today's tax hike could see the City's high-earners flee to lower tax locations such as Ireland and Switzerland. "Unfortunately, the Chancellor seems to have ignored the knowledge economy entirely," Mr Henderson told The Times. "This has got to reduce the UK's attractiveness as a place to do the kind of business that requires highly-skilled and correspondingly highly-paid individuals, whether that is people choosing to go overseas or - the hidden cost - people who never come here at all.

Posted by devo @ 10:21 PM (2243 views)
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50 thoughts on “Bye! Don’t forget to write!

  • Who are these highly-skilled individuals earning £100K+ who are planning to leave?

    Make yourselves known unto us; tell us why you are so indespensible.

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  • inflation is eating my savings says:

    I would have preferred taxation to 95% just above my pay grade!
    Can anyone point me to an analysis of why the people earning over 150k are indispensible? Happy to believe it. But would like to see it.

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  • devo put to one side the argument that anyone “earns” £100k+. Ask yourself this – how is aggregate demand affected by increasings in taxation at a time when demand side is to be positively massaged. The them and us argument proferred by you is a red herring. By the same way that a brain drain is too. [ the brain drain is an argument if you have marginal tax rates of above 50% by the way].

    As for their skills 2 words Frank Lampard (and i dont even support Chelski).

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  • mytimeisnigh says:

    Why £150,000, they should have increased tax for all earning over £70,000. What a mess the country’s finances are in, as if we didn’t know it already. Plus the cuts in public services and welfare handouts needed to be addressed but of course they are being delayed until after the next general election. Please make a note, everytime a labour government comes to power, they make a mess and this is the biggest one to date. How could Darling hold his brief case up like he was proud??

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  • @techieman, unless you are Frank Lampard, I would like to repeat my challenge…

    Who are these highly-skilled individuals earning £100K+ who are planning to leave?
    Make yourselves known unto us; tell us why you are so indespensible.

    Reply
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  • Brain drain to where? Where are these super-stars going to go? La-la Land? There is nowhere that will offer them the same level of remuneration and security as they have enjoyed until recently. Wall St is a busted flush and do they really think they’ll land cushy positions in the Eurozone or Asia? Asia? Which part? Are they prepared to live in Japan? China? Even if there are positions open, where is the evidence that they are available to these ‘indispensable’ people?

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  • Good God. Don’t you understand that the majority of entrepreneurs providing jobs earn £150,000 or more? 9/10ths of our wealth requires the efforts of these people. You are insane to see socialist benefits here, the tax receipts will go down as a result of lower economic growth. This is pure political posturing that is disastrous and will achieve nothing.

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  • mytimeisnigh I agree, perhaps not £70K but why not £100k….?

    What proportion of the populace earns £150k+…?
    Even if £150k+ earners are good effective employees, or not as may be the case, both are expensive to a firm. Perhaps the idea is to encourage these high earners to go abroad and try their luck. Follow their greed gene to Middle East, Luxemburg, Switzereland….whatever, wherever….This enables opportunities for younger people to take their place at lower salaries doing the same job thus reducing unemployment and creating opportunities.

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  • @devo,

    Do some research. Here’s a quick list from the Telegraph: jobs with salaries above £150,000. The jobs are mostly director-level or senior management in big companies, with titles like “Head of Global Supply Chain Management”. It’s not exactly a large group of people (just 34 jobs listed here) and I suspect their number will fall in the short-term as the recession bites.

    For ordinary employees the tax is unavoidable. Even footballers pay 40% tax on the salaries they receive from their clubs. However if they earn money from advertising or promotions then there are a myriad of schemes to get around the tax. Details in the Guardian: How stars avoid tackle by the taxman.

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  • japanese uncle says:

    Without hedge fungus managers and other parasites who are undeservedly rewarded, UK will be 100 times better place. Go away never to coma back, you will never be missed. Adios.

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  • I am sure football clubs will find someone to play for them if the current crop don’t like their tax bill.

    Its not footballers that are the issue its all the management that think they are worth this, one example would be senior bank management.

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  • Talking of footballers again, there have been accusations that English football clubs have missed out on some of the world’s best players, including Ronaldinho and Luis Figo, because of tax. Details in the Guardian: UK tax ‘keeps top footballers out’.

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  • Read your post twice drewster – how is this addressing my challenge?

    I repeat:

    Who are these highly-skilled individuals earning £100K+ who are planning to leave?
    Make yourselves known unto us; tell us why you are so indespensible.

    Reply
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  • devo,

    Nobody is indispensable. Without bin-men we would still live, but our lives would be smellier and dirtier. Even doctors and nurses aren’t necessary – life would go on, but it would be shorter and sicker. Without the tax revenue provided by high earners, we wouldn’t be able to afford as many bin-men or doctors or nurses.

    To answer your original question directly, here’s a piece from tomorrow’s Telegraph:

    Telegraph: Budget case study: ’50 per cent tax could make me leave country’.
    Simon Baker is happy to admit he has flourished under the Labour Government. However, the announcement that anyone earning more than £150,000 would be taxed at a rate of 50 per cent has shocked Mr Baker, who earns more than this amount. He is also worried that many of his employees – high flying Europeans, who have chosen to make London their home, will return overseas.
    “We employ 40 people in London, most of whom will be hit by the 50 per cent tax band. There is no reason why an Italian working for us won’t return to Rome, or work in Brussels. The Government is going to lose an awful lot of tax revenue.”

    Frankly if I were Mr Baker I’d consider moving the whole company to Brussels or Rome or Berlin or Madrid or Geneva or anywhere. His key employees are clearly already comfortable working in a foreign country. The hardest part is choosing which country.

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  • Without bin-men we would still live, but our lives would be smellier and dirtier. Even doctors and nurses aren’t necessary – life would go on, but it would be shorter and sicker.

    If a binman left the country, another would replace him.
    If a doctor or nurse left the country, others would replace them.

    Fail. Sorry.

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  • “Frankly if I were Mr Baker I’d consider moving the whole company….”

    What does Mr. Baker do that is so indespensable to our country?

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  • devo,

    It’s not the bin-man or the doctor who will leave the country. It’s the likes of Mr Baker and his high-earning employees who will leave. The result will be lower tax revenues for the UK government. Without those tax revenues, we can’t afford to pay binmen and doctors.

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  • mrr19121970 says:

    as far as I’m aware most of these high-earning foreign workers usually fall under the non-domiciled scheme and pay little to no tax at all as the earnings were neither generated nor paid into the UK.

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  • little professor says:

    These parasites tend to set up fancy vehicles to avoid paying tax anyway. Remember the fuss about the non-dom billionaires who set up shop in London but pretend they still live elsewhere, thus paying less tax than the average British citizen on £25k a year.

    Let them go. It’s the same threats we got when proposals were made to limit bonuses for nationalized banks – that they would move to other banks that would pay them more. Which banks are these, that are doing so well they can afford to shell out millions on bonuses to a few more incompetent bankers?

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  • Ggggggggarry says:

    There are 600,000 people in the UK who earn over £100,000.00, 300,000 of these earn over £150,000, 1% percent of people working in the UK or 0.5% of the population. The majority of households in the UK have a total income of less than £40,000.00 per year. Draw your own conclusions and look critically at what interested parties would have you believe.

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  • Devo – 1st my reference to “fat frank” was a bit of a joke. Second i think Drewster is right. Saying that you want aload of bin men and nurses earning relatively small amounts at the expense of high earners misses the point. First if the whole country consisted of just Bin men then how would there be any production (in the global sense of the word) to pay for em? The non public sector needs to be encouraged to produce goods and (sorry) services that can be traded to create the profit on which any welfare state depends.

    As everything that’s a balance. At some point a marginal tax rate above a certain percentage will discourage entrepreneurs – personally i dont think its 50% – the brain drain occurs higher up. To answer your question the people who we want to encourage are those same entrepreneurs/ companies that employ people and multiply the effects of their own labours throughout the workforce. Is the marginal rate 50% and is the marginal amount £150k – i would argue not. For a family that is settled here and earning £150k there will be some belt tightening but not enough de-incentive for them to leave.

    Its blinkered and short-sighted to equate earnings of more than £150k to be the SOLE domain of bankers. If you want to vilify “bankers” [and even then who exactly constitutes that group is subject to a bit of interpretation] i dont suppose that there would be too much opposition, but why shouldn’t someone that takes a risk and that then enhances the aggregate demand and wealth of the country be adequately rewarded? Whether that reward is £150k / £200k or whatever is a moot point so long as it bears a relevance to what is creating productive capacity enhanced than not. Incidentally i agree that Fat Cat public monopolistic bosses add very little and should not in my view be compensated to a huge degree- the same generally with top council officials – unless it can be demonstrated that they have provided VFM and delivered efficiencies over and above the norm for the council tax workers. The former is a matter for shareholders but sadly there is no direct link between compensation for top council employees and the people that pay em. [you may be able to vote out a party but not the compensation scales in place].

    As for others replacing them at lower values that basically ends up with everyone being poorer – in all senses of the word. At some point you would only be able to replace your nurse with someone that hasnt had 5+ years of training.

    Relative to doctors – many consultants do earn much more than £150k – i have no truck with that but if there was no-one able to contribute enough to pay them in the aggregate via tax then where would we be ? ah yes with a huge PSBR – now that rings a bell?

    All in all it strikes me you may be living in the wrong country!!!

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  • I recently earned a quarter of this amount as engineer overhauling the gas turbines of 747and A300 aircraft, little value is placed on years of study I had to do, and the responsibility for the safety of 500 plus people.

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  • it_is_going_with_a_bang says:

    I can’t see it making much difference. Except that those earners will now have 10% less over the £150k to spend.
    This is not going to suddenly make people leave or stop people coming.

    There are plenty of methods to reduce your tax ‘liabilities’ if you are earning figures of over £150k. If you earn that much you will pay an accountant to do it for you.

    But it sends a message out doesn’t??? It should just have 45% not 50%. That is too much in one go. It just stinks of desperate headline grabbing. It is designed almost entirely as a provocation to the conservative party by labour. It is simply drawing a line in the sand and daring someone to walk over it.

    The amount of money it will generate is insignificant – it is merely the ‘act’ itself which is intending to cause opinion and divide. Just look at the comments here this is exactly what the desired effect is.

    Nothing to do with generating money for the country – everything to do with keeping Labour in control of the country.

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  • 13. devo said…I repeat:

    ”Who are these highly-skilled individuals earning £100K+”
    ”Make yourselves known unto us; tell us why you are so indespensible.”

    OK, hands up, I’ll rise to the challenge and admit it.

    Why so indespensible? Don’t know, but I do know why I am indispensable. Lol

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  • mountain goat says:

    I agree that this is political however there tends to be positive and negative sides to things. Tax might be helpful in setting a ceiling on earnings. £149k instead of £160-> If big bosses take a pay cut then people lower down may feel more inclined to as well, which is what the UK needs to become more competitive.

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  • it_is_going_with_a_bang… exactly.

    I can’t see this making a big difference, it’s 10% more of wages earned over 150k…. practically nothing to people that already have plenty. It’s a shame that it’s only the richest have the voice in this country. I can’t say I’ll miss them if they decide to leave for wherever. England might become a green and pleasant land again.

    Si

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  • I would be interested to see an analysis of how high earners push up the cost of living (mainly through housing costs) for the rest of the population. Could it be for every extra £1000 they bring to the economy, say, they push up the cost of a nice house in London by £5000? So in other words, if you’re a middle income proffessional type in London, you’d do better if all these big fishes left and went somewhere else with their revolting sportscars and neglected wives.

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  • I’ve never accepted the notion that the highly paid necessarily deserve their income, nor that high taxes will send them fleeing to some other country that tolerates inequalties better than this one. There are plenty of highly skilled people who are on relatively low salaries – how do you rate the skill of, say, school teachers, theoretical physicists, social workers …? As for footballers, how much did Bobby Charlton get paid in his heyday?

    Incomes, in my view, have in many cases little to do with contributions to the economy or any intrinsic worth. Rather it is social, economic and political structures that allow some to receive excessive awards, often unjustly. Some of the best paid in recent years have been those in finance, and we have seen where their skill has got us. It seems perfectly reasonable that the highly paid should be more highly taxed – the principle of a progressive tax system which is an important component of a modern and equitable society. For a long time the tax burden has fallen disproportionately on the lower paid. The 50% tax rate was long overdue.

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  • another alan says:

    Spirit Level by Richard Wilkinson

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  • I will be seriously hit by the tax hike – I 100% own and run a small creative service company, world leaders in what we do in a UK growth industry admired the world over. After my salary, which is in the 50% tax bracket, the profits before tax will be 500k this year rising to £2m in 2012 – we will quadruple our workforce in that time. That was the plan.

    This will be the fourth business I have set up, developed and sold on, but, having seen where this was going a year ago and feeling very discouraged, unsupported and unwanted by the government; I set plans to leave the UK to an environment where I will feel more encouraged to ‘go the extra mile’ to build the business. The ‘tall poppy’ syndrome in the UK, propagated by the government and media and sadly seen in the comments on this page, has always been an issue with trying to be successful here. But it has reached the tipping point for many people like me.

    What people from Napoleon to Brown and through these forums fail to realise is that the UK is a nation of shopkeepers (small businessmen) who, if encouraged but a little for their travails, will flourish and support a growth economy.

    What they don’t get is that people like me are not greedy sods in it for the money, but have an ability which gets them out of bed in the morning with a need to do and achieve something. If we feel discouraged, we tend to stay in bed that bit longer (so to speak), take less risks and wonder if it’s worth going ‘the extra mile’. It’s a fine balance to encourage entrepreneurs to grow the economy and employment and to maximise the tax take – but the UK gov has gone beyond the tipping point for thousands of high earners who, whilst not necessarily leaving, will be significantly less enthusiastic about risk, effort and growth. Who gains?

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  • So the bankers have taken their high salaries. Stolen the lot. And then got out before they get taxed at a higher rate. They’ll leave that to the others.

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  • I think letthemfall is correct when he says that people earning over 150K will not necessarily leave the country. Where would they go? Many European countries already have high taxation and impose all sorts of wealth taxes on your assets. The US is planning to increase its taxation of higher earners and the health and dental insurance costs for a family are horrendous.

    I have lived in Australia, the US and Singapore. I have a US Green card and a very portable job but I’d still rather live in the UK. Quite apart from preferring the UK, my kids would have to do without their grandparents, friends and relatives etc. Without wishing to melodramatic there is something slightly seedy about leaving your country because you have to pay a few quid extra. I’m not suggesting it’s as bad as dodging the draft during a war, but its not far removed.

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  • Morning Devo, I’ll take your challenge:

    A friend of mine started a greeting card/gift company about 20 years ago. He took out a 100% mortgage on his house and invested the lot. If his new company failed then he would have lost his house and be declared a bankrupt. He came up with all the product ideas himself and still does to this day. The company has grown to employ more than 40 people and produces/prints nearly all its product in the UK, therefore indirectly employing a few more people. More than 75% of his product is exported which can only be good for the UK.

    I’m pretty sure that he usually earns substantially more than 150K pa. He took a huge financial risk, personally creates great product and employs many people. I’m therefore pretty sure that he deserves every penny and the country would be worse off without him.

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  • @techieman # 21,

    Thanks for clarifying that. I was starting to doubt myself!

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  • Hello again, flashman. Long time no see! Hope you’re keeping well.

    I personally think drewster’s argument sufficed, as does yours
    – It is not the direct effect of the high earners leaving but the knock on effects of lack of tax revenue and that of the lessening of incentive for businesses to remain on this island – especially the global headquarters of multinationals – I think it could even cause pressure for lower rates of corporation tax in an effort to keep them here, which would be even worse!

    I believe that if a state is going to tax there should only be one tax – a financial transaction tax. Every time capital actually gets transferred between entities (whatever entities, maybe bar registered charities) it gets taxed. This minimises market distortions. The next step is to minimise taxation itself – I think I am categorised as an anarcho-capitalist, anti-consumerist.

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  • I and Ms D’oh are running a business that we started from scratch. It is quite likely that we will be in a situation where we will fall into this tax bracket in the next couple of years…but we won’t be paying tax in the UK. I don’t have a problem with small business people earning these amounts – they have taken the risk and if others want to undercut us and take our business, it is a free market.

    Where I do have a problem with huge paypackets is where there is no link between performance and pay. The thought that most (but not all…some are very good) of the GPs I have dealt with in the past 17 years in this country are on anything approaching100k is very depressing. Some of the local council “jobs for the boys” that have been awarded gold troughs also fill me with despair as a taxpayer. There also has to be questions of the remuneration in parts of financial services, where bonuses are paid on short term performance of long term financial contracts/funds. For example, the simple fact is that 95% or so of managed funds perform worse than a tracker over a period of 5 years. There are some stars out there…but I suspect a majority of the mega bonus crowd don’t fall into this category.

    Having said this, I am in favour of progressive taxation and would tolerate 50% income tax if public services lived up to the tax. The problem is that the UK is taxed liked a Scandinavian country, but we have Zimbabwean public services.

    In summary, I have no problem with high rewards when they are truly correlated with success. Unfortunately, I’m not convinced that this is the case and the tax take is, as far as I can see, squandered by the government.

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  • ontheotherhand says:

    I earn over 100k exporting accounting services to foreign companies. Every time I win a deal for us I get some commission and we employ some more people in London. I will either work less rather than give these profligate idiots half of my money, or I will set up the company in Malta or somewhere else in the EU where my tax will be 15%. Just this feeling of spite that 98% of the people hate me here is enough to make me go. I wonder how many of us will go who pay 40k or 50k in tax and whether that will result in more tax lost than the extra taken from those who stay.

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  • Hello 51ck. I’m very well thanks. Been on an extended holiday.

    onetheotherhand: Why would you want to live in Malta or any other marginal country with super low taxation? Have you every lived abroad? It’s not that great. Johnny foreigner is often quite annoying and most expats spend their days moaning about them. Paying a few more % points is not that onerous. Apart from a few people who get lucrative transfers from their company, it’s my experience that most people who emigrate have not been successful and are unrealistically looking for a better life elsewhere. If you have a few quid, then enjoy what Britain has to offer and cough up the extra tax. Labour will be gone soon and your country needs you

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  • ontheotherhand says:

    My wife is from Malta and whilst I prefer the UK, I like a lot about Malta and it’s 3 hours away so I can spend 90 days a year here anyway. When Thatcher came to power the tax take actually had to go up for a few years to fill the hole Labour left. It didn’t leave the population with warm feelings about her and I think the Conservatives will have the same problem and there is no Falklands around to get that second term to consolidate the economy.

    I have 2 Masters degrees that I worked very hard for. In my first job I normally got in by 7.30 and rarely left by 7. In my 20’s I worked on top of this to get my accountancy exams whilst friends were in the bars. And yet the common theme on any blog including the first comment here is that I am a piece of dirt on the bottom of society’s shoe and that if I leave some worthy person unemployed from their buy to let empire will just step in my shoes.

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  • Interesting points which just show how polarised views can be. For myself although i have never been entrpreneurial in the true sense my father and parental grandfather both had smallish retail empires. They both worked long hours and were never sick and rarely took holidays and i suppose would have taken down in excess of the £150k per annum in their equivalent times. [they both couldnt delegate and didnt like debt – which is probably why i didnt inherit a tescos equivalent :-).]

    It strikes me that the views here can be generally split between the people that have had exposure to the entreprenerial spirit either first hand eg ontheotherhand and D’oh or secondhand such as Flash and myself., and those that probably (tin hat time) havent. One of the things that was instilled in me from an early age was that no-one owed me a living.

    I would like to see the demographics of the people earning more than £100k in more detail. Which are “fat cats” which are high level council employees and which, in my view, really create and add to the wealth and standard of living we enjoy (and yes it is enjoy) in this country.

    In general people are recognised and rewarded based on what skills they bring to the table. That some skills are more highly valued that others is im afriad a fact of life. Personally i think that a coal miner is worth more pay than a London tube driver…. but my personal view isnt reflected within society.

    As for the 50% rate – i have no problem with that IF thats it – the issue is if its the thin end of the wedge and NuLabour realy revert to the old ways and go toward taxing people at marginal rates of 90%+ (as they used to).

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  • shipbuilder says:

    There’s not a finite amount of talent in this country and I don’t believe that the talented are necessarily high earners, or that high earners are necessarily talented – certainly not in my experience.
    Anyone who wishes to leave the country because they don’t want to pay tax will quickly be replaced by someone who will and wants to stay in the UK and support it and perhaps the country might be better off for it.
    If you are an employer who will take you business elsewhere and shed jobs in your home country because you personally are being taxed a bit more, what sort of person does that make you?
    Does increasing the tax on people who earn large amounts reduce demand? I’m not sure – demand for what? I would have thought that much more demand for the economy might be produced by boosting the spending power of those on lower incomes.

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  • shipbuilder says:

    I should say that I think that land value tax is much preferable to income tax and that I have absolutely no problem with what anyone earns, should they be successful in whatever field they choose to work in, as long as it is fairly earned. However I do believe that we all deserve an equal go, that our economic system rewards the wrong things and that if you have the money, why wouldn’t you want to give back to the community/country that paid for your education, health and ensured that you were in a position to be successful?

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  • Greenshootsandleaves says:

    Nothing to stop their employers paying them a bit more to offset the tax hike. Yes and that too would be taxed, helping a beleaguered Chancellor balance his books! Think about it: the employer is given an opportunity to show just how highly he values his staff; the high earners are not swilled away into the brain drain; and the country continues to reap the benefits of their irreplaceable expertise. Now that’s what I call a win-win-win-win situation!

    BTW, just out of interest, could ‘the future former Sir’ Freddie Goodwin let us know what sort of taxation increase would have persuaded him to up sticks?

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  • No one seems to have realised that the marginal tax rate at £100k is now 68%!

    In addition to £1 out of every two you earn going to the IR in leiu of the personal allowance clawback, you will also be paying more of your income at the higher rate (40%) as a result of the slice taken out lower down by the eradicated zero tax personal allowance.

    Gordon Brown today: “What we are about is aspiration…” Don’t make me laugh – its all about spin.

    Yet, another devious backfiring attempt to divert the backbenches and redtops from the disastrous economic news in the budget at the expense of those who can help make the country prosper.

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  • 30. Tipped Off said…

    “This will be the fourth business I have set up, developed and sold on, but, having seen where this was going a year ago and feeling very discouraged, unsupported and unwanted by the government; I set plans to leave the UK to an environment where I will feel more encouraged to ‘go the extra mile’ to build the business. The ‘tall poppy’ syndrome in the UK, propagated by the government and media and sadly seen in the comments on this page, has always been an issue with trying to be successful here. But it has reached the tipping point for many people like me.

    What people from Napoleon to Brown and through these forums fail to realise is that the UK is a nation of shopkeepers (small businessmen) who, if encouraged but a little for their travails, will flourish and support a growth economy.

    What they don’t get is that people like me are not greedy sods in it for the money, but have an ability which gets them out of bed in the morning with a need to do and achieve something. If we feel discouraged, we tend to stay in bed that bit longer (so to speak), take less risks and wonder if it’s worth going ‘the extra mile’. It’s a fine balance to encourage entrepreneurs to grow the economy and employment and to maximise the tax take – but the UK gov has gone beyond the tipping point for thousands of high earners who, whilst not necessarily leaving, will be significantly less enthusiastic about risk, effort and growth. Who gains?”

    I don’t get the impression that anyone on this thread is talking about people such as yourself. However why would your personal tax bill make it harder for you do do business in the UK? Why would your personal tax bill make you less enthusiastic about risk, effort and growth? If you have the drive to be successful and you are, what does your tax bill matter? Wouldn’t you rather be successful in your home country? What are you in business for?

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  • I get the impression that this is not about what’s good for the economy, but simply a case of people feeling they are paying too much tax – but who doesn’t feel like that? Let’s not forget what tax is for – roads, hospitals, police etc. etc. So if the tax money is badly managed is that a reason not to pay any? I get the impression that people are happy to take rewards proportional to their efforts, yet don’t seem to feel the same way about paying in proportion to the benefits they and their businesses receive. Isn’t that just a little mean?
    Who’s prepared to pay the wages for their employees to afford private healthcare, to pay for local policing, to pay for waste collection, to pay for roads to their shops and factories?

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  • Shipbuilder (@45), you pose some good questions and I will try to answer. I don’t look at it so much as a personal tax bill but the other way round – how much net I have to live off. The mess we have been dragged into means I have either to work a lot harder (not easy) for many years to stand still or I can go abroad for a similar lifestyle without as much work. This has always been an option for me, but with more tax being taken for the foreseeable future (and more tax hikes to come for high earners) I have to run faster and faster to keep up, and so it gets to a stage where the temptation to ‘step off the wheel’ becomes attractive. I recognise this isn’t a choice most people have and to still maintain net income, but if you leave personal issues out (like family etc) it can become quite compelling if you don’t trust your own government – and I don’t.

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  • Shipbuilder @45 “Why would your personal tax bill make you less enthusiastic about risk, effort and growth?” – I have had a fairly stable net salary for the past 20 years; let’s say a net £80k at today’s prices. But I have been motivated to build the businesses to add significant retained profits above my ‘drawing needs’ which adds to the asset (and sales) value of the business because I have felt encouraged to do so through the balance of risk and reward. It’s now the same risk for less reward – hence the ‘stay in bed’ syndrome. I am referring to growing the business (employing people, paying more corp. tax, looking to make a capital gain on a sale, etc), not keeping it on a level keel and keeping my salary and day to day lifestyle the same which I would regardless.

    When I was a paperboy on 5 shillings for the morning round, an extra shilling to do Saturday wouldn’t get me out of bed. But when they offered me Sunday for 3 shillings, that got me out of bed – that reward was significant and made me more productive (even though I may not have needed the extra cash, it only went on fags).

    Of course I subsequently discovered why it paid x3 – the papers weighed x4! Still there where other benefits, which some of you may recall.

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  • Shipbuilder, I’ll try to answer these in one go: “If you have the drive to be successful and you are, what does your tax bill matter? Wouldn’t you rather be successful in your home country? What are you in business for?”

    The drive I mean is to be more successful, rather than moderately successful. There are private companies in my field 15 times bigger than mine, my target is to get to be a quarter of their size, there is no reason to stop there other than ‘is it worth the effort’. If I know that more and more of the value I am working towards is going to be taxed, I will be more inclined to grow less, if at all. Growth takes more risk than maintaining the status quo – it’s a very bad lot we are in if the govt is broadly discouraging people to create (taxable) wealth.

    Re: ‘Home Country’. Like many on this page, I have had the privilege of being born in the UK – a one in 110 chance – and recognise this has been the main reason I am where I am today. But I feel the county has been irrevocably destroyed by the govt in many ways. My kids take this all for granted, but I can’t. I’m not talking about taxes but on the destruction of values, rights, governance etc etc. I recognise that I am having my cake and eating it but it makes me truly depressed on a deeply human level, and if I can step out of it for some fresh air then I will.

    “What am I in business for?”. Every day I walk into work with a smile on my face. I do love it and that’s why I do it, to feel good. But I don’t when I look out at the destruction of UK around me; the wilful encouragement of the development of an underclass; the bully police state; the waste of tax revenues; the destruction of services; the lies and ineptitude of politicians, working in collusion with the media; the cynical spin and brazen lies we are fed and increasingly accept.

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  • Hi ontheotherhand, flashman. Tipped Off

    As businesses owners you allocate capital to seek an acceptable NET, risk adjusted after tax returns. There are few areas that incur less tax (CGT at 18%, spread betting at 0%) and perhaps you/your friend should consider risking your capital in other areas that provide higher risk adjusted post tax return.

    Unless of course, Gordon is gonna give you a contract to put up a poster for say £10m with a net cost of £1m, then your risk adjusted net return is still superiror and you should do it. Always look at net risk adjusted after tax return 🙂

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