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UK taxation policy.

Imagine making a raft of tax cuts when in a couple of years you've borrowed hundreds of billions of pounds. Traders/investors don't want our currency or bonds because they see that our ability to pay our debt has just become far more impossible than it previously was. They'll invest elsewhere now.
 
BigT said:
Interest rates at 5-6% is actually considered normal it’s just a whole generation has only seen 1% since 2008.

I can actually remember them at close to 20% in the early 90’s and people were just handing the house keys back to the bank.
The housing market crashed and then young people could actually afford a house again, it’s all part of the economic cycle, the mistake is believing we had somehow got away from it.
I’m a great believer in saving some for a rainy day, I know I’m fortunate and in some respects got lucky but I also started with nothing, not even a decent education.
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Mortgage rates in the nineties averaged out at about 8%, they never went over 16%, and then only for about a year.
Back in the early eighties, when I worked very briefly for a building society, interest rates were a staggering 16.5%, so high risk punters were paying over 20%, with a 30% deposit.
Keys were left through the letterbox every night for about six months.
But back then you could get a decent house for around 20 grand round here.
 
When the IMF criticises your policy, something unprecedented for a G7 country, it might be time for a rethink.

They've criticised the policy as it's likely to drive up prices, which is working against the aims of the central bank, and it's likely to increase economic divisions.

The statement in full:
"We are closely monitoring recent economic developments in the UK and are engaged with the authorities.

"We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.

"However, given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy.

"Furthermore, the nature of the UK measures will likely increase inequality.

"The November 23 budget will present an early opportunity for the UK government to consider ways to provide support that is more targeted and re evaluate the tax measures, especially those that benefit high income earners."
 
I still think (and hope) that what they tried to do won't be forgotten, hopefully neither will her stubbornness and incompetence that she's shown all week. I'm still stunned, what the hell were they thinking?

I also note as well, that we're now talking well over a week ago since this car crash occurred and we still don't have a single growth or spending forecast and the OBR hasn't been granted a flick through the books. Leading me to believe they still don't know what they're doing at all, but rather caving in to overwhelming internal party pressure. What a shower.
 
Good to see that the U-Turn populist policies are still in full swing.

Least a number of people made money from the pound dropping like a stone eh?
 
Has Kwarteng reversed everything in the mini budget, or is it just the abolition of the 45% rate of income tax that’s been u-turned on?
 
The U turn is of course welcome, the idea was ridiculous in the first place. But Liz Truss was literally on the TV defending it yesterday and less than 24hrs later it’s gone.

Most likely due to the lack of support within the Tory party than due to any real listening of what the reaction has been within the electorate.

From the markets point of view though - this is just more evidence to them that the current chancellor and PM have no clear strategy on the economy and that their plans are not funded, so more uncertainly - it’s a total shambles all round.
 
Matt N said:
Has Kwarteng reversed everything in the mini budget, or is it just the abolition of the 45% rate of income tax that’s been u-turned on?
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Just the 45% craziness. But the conference has only just begun and there's a lot of angry Tories out there, not to mention the economic damage that's be done so far. Watch this space.
 
Sorry to go off on a tangent, but I was thinking randomly about corporation tax earlier.

One question I have is; why is it that it isn’t tiered based on pre-tax profits, like how income tax is tiered based on income?

Surely if they tiered corporation tax like income tax, it would be fairer?

Under the current system, it seems as though smaller businesses get a less fair deal compared to the huge corporations with eye watering profits; the amount that gets taken away likely wouldn’t even make a dent in the profits of the huge corporations (19% of, say, £1bn still leaves a pretty eye watering £800m or so), whereas the same percentage for a small business could have a considerable impact (19% of, say, £10,000 only leaves about £8,000).

Does what I’m saying sound vaguely rational? Or is there a reason why corporation tax is a flat rate?

I know it’s probably the latter, but it was just a thought I had…
 
Matt N said:
Sorry to go off on a tangent, but I was thinking randomly about corporation tax earlier.

One question I have is; why is it that it isn’t tiered based on pre-tax profits, like how income tax is tiered based on income?

Surely if they tiered corporation tax like income tax, it would be fairer?

Under the current system, it seems as though smaller businesses get a less fair deal compared to the huge corporations with eye watering profits; the amount that gets taken away likely wouldn’t even make a dent in the profits of the huge corporations (19% of, say, £1bn still leaves a pretty eye watering £800m or so), whereas the same percentage for a small business could have a considerable impact (19% of, say, £10,000 only leaves about £8,000).

Does what I’m saying sound vaguely rational? Or is there a reason why corporation tax is a flat rate?

I know it’s probably the latter, but it was just a thought I had…
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While a larger tax burden on individuals doesn't lead to significant emigration as is always sited in arguments for tax reductions on the rich, companies are much more fickle and will move their operations elsewhere if it is more tax efficient to do so. You then not only lose the tax directly paid by the company but also the taxable earnings on everyone they employ centrally. Tax breaks for big companies can very easily pay for themselves many times over.
 
It is important not to lose sight of the 3d picture too.

There is a trap of looking at corporate profits as these faceless "banker types" making a load of dosh.

In reality, post-corp-tax profits go to shareholders. Again in some circles, there is a very skewed view that these again, are privileged banker types (hint: they are not).

Those post-corp-tax profits will largely get paid to shareholders. Shareholders include people's pensions, people's S&S ISAs etc.

So when people talk about limiting corporate profits, there is a net effect of hammering people's pensions too.

Things are never quite as simple as the angry mob will have you believe.
 
Nick🎢 said:
It is important not to lose sight of the 3d picture too.

There is a trap of looking at corporate profits as these faceless "banker types" making a load of dosh.

In reality, post-corp-tax profits go to shareholders. Again in some circles, there is a very skewed view that these again, are privileged banker types (hint: they are not).

Those post-corp-tax profits will largely get paid to shareholders. Shareholders include people's pensions, people's S&S ISAs etc.

So when people talk about limiting corporate profits, there is a net effect of hammering people's pensions too.

Things are never quite as simple as the angry mob will have you believe.
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Pension funds will always adjust their portfolio and generally look to more long term investments that short term profit dividends.

pluk said:
While a larger tax burden on individuals doesn't lead to significant emigration as is always sited in arguments for tax reductions on the rich, companies are much more fickle and will move their operations elsewhere if it is more tax efficient to do so. You then not only lose the tax directly paid by the company but also the taxable earnings on everyone they employ centrally. Tax breaks for big companies can very easily pay for themselves many times over.
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Thats the often commonly sighted argument but the country in Europe with the highest increase in the rate of inward corporate investment in Europe is currently France (not the highest but the fastest growing), it has a corporation tax of 27.5% compared to our 19%

In general corporations want good infrastructure and a skilled and healthy workforce with relatively stable government and a big market to easily sell to, over a few percentage lower tax burden.
 
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I've always liked the idea of favourable tax rates for businesses that benefit the country. I know this does happen currently, but on a very small scale and often concurrently runs alongside corruption. But surely we can reform it and press the reset button?

Businesses aren't people, and it's very rare for them to act out of anything other than their own financial interests. Otherwise they wouldn't be a business would they? Although we think that some businesses do charitable and kind things because they're being "nice", there's almost always a financial motive behind it. Be that public PR, keeping its workers onside or aiming for a tax break, there's always a long term financial incentive.

Supermarkets have widely adopted the giving away of (an extremely small amount) some food waste to charity for that very reason. They don't do it to be kind, they do it because it's a loss they claim tax back on.

I'd like to see more tax incentives for businesses that employ large amounts of people, on high wages, decent pensions and behave ethically and for the good of the country. I know we currently flirt with this idea by giving cash incentives loosely to all manner of rogue companies. But I think the whole system needs reforming.

Is it right that a mutual/cooperative, a PLC and a privately owned business pay the same amount of corporation tax for example? Is it right that a foreign based company dolling out the bare minimum pension scheme to its workers should be taxed the same as a British company that still offers a final salary scheme? Should James Dyson have been allowed to sack loads of his workers and move his manufacturing operations abroad (so that he could become even richer) without financial consequences through the tax system? Should a business that brings decent jobs to the UK not get tax incentives for doing so?
 
BigT said:
Corporation tax isn’t really fit for purpose anyway, one word, Amazon.
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I absolutely agree that corporation tax as it operates is out of date and needs a rethink, but lower corporate tax burden has never demonstrated higher inward investment compared to other countries.
 
Dave said:
I absolutely agree that corporation tax as it operates is out of date and needs a rethink, but lower corporate tax burden has never demonstrated higher inward investment compared to other countries.
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I agree with you on that, large corporations can too easily bypass or adjust their in country earnings.
If it was as easy as just having a low corporation tax then there would just be a race to the bottom, large corporations as you said before go where the market is, if the tax system is easy to bypass then win win.
 
The Bank of England have intervened again for the third time to try and calm the markets warning of "a material risk to UK financial stability" .

They are going to buy more government bonds to try to stabilise their price and prevent a sell-off that could put some pension funds at risk of collapse.

Can we get somebody competent in No. 11 please?

www.bbc.co.uk

Bank of England in fresh emergency move to calm markets

The Bank of England warns of a "material risk" to financial stability as it buys more government bonds.
www.bbc.co.uk
 
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