Income Tax Capped At £100k

[Chinahand]

La Dolce Vita - where do you think the line between deserving and not deserving wealth lies?

I don't know how LDV would answer, but I think you try and frame the issues over narrowly.

 

There is tendency for wealth to accumulate so rich get richer and poor get poorer, so this ends up being highly concentrated in the hands of a very few.

Skeddan, it was LDV who started going on about the undeserving rich, I wasn't framing the issue at all - I was querying, and not answering HIS framing. In many ways I agree with your attempts at answering them - sustainability, continued wealth creation etc are vital (and are a major part of my examples!) - the operative word is wealth creation rather than wealth distribution; I think I agree there will be issues if the IOM just distributes wealth from the UK to the IOM - BUT as you say it is for the UK to make its own tax policy and the idea that you can stop money and people rellocating is pretty self defeating.

 

Wealth in a globalized world is about creating ideas and realizing those ideas as efficiently as possible around the world. People are much less trapped to particular locations or sources of funding - I believe that countries that accept this and create policies which allow governments to raise funds to provide social welfare while freeing people, ideas, goods and money to move where they wish will be far more successful than those that don't.

 

I find your statement that the poor get poorer controversial. At a relative wealth level Geni coeficients have tended to drop over time - though obviously this isn't an inevitable process, but most definitely at a world level this is currently true (mainly due to an emerging middle class in the BRICs) even if at a country level they are increasing in some places - US in the last 25 years etc. But compared to 100 years ago wealth is more equitably distributed almost universally around the world.

 

Also I believe trends in social mobility are also positive globally the world - here the myth of the American dream is being broken on the reality of a North European focus on education and universal access.

 

In absolute terms the resources available to the less well off segments of a particular society are growing all the time and in western countries the proportion of people living under absoulte definitions of poverty are now negligable. Globalisation's triumph has been starting similar processes off in China, India etc lifting billions of people out of poverty around the world.

[Skeddan]

the operative word is wealth creation rather than wealth distribution; I think I agree there will be issues if the IOM just distributes wealth from the UK to the IOM - BUT as you say it is for the UK to make its own tax policy and the idea that you can stop money and people rellocating is pretty self defeating.

 

That really is the nub of it. There will be issues if IoM has economic strategy which is dependent on offshored wealth distribution, especially when this starts driving decisions, regulatory framework etc. in ways which may actually be detrimental to wealth creation.

 

As example, in another thread someone said there are VAT advantages to film-makers using local company to import goods and services from UK, thus putting local providers at a disadvantage. Whether this is true or not it provides a simple illustration - there's the danger the economy becomes built on tax fiddle and fudge of a kind, and which looks good on paper and does deliver tax income while this lasts, but which doesn't actually have robust sustainable long term economic benefits.

 

Really the point is not so much to do with whether right or legit, but about moving from dependence on legit wealth distribution which is eroding and non-sustainable. Instead should think medium-term (20-50 years) and regard current economic situation as stepping stone towards building a healthy and robust economy. In many respects the Republic of Ireland offers some examples of how this may be done - and which to many is proving to be more attractive than IoM for 'offshoring' despite higher tax. Make hay while the sun shines, but haymaking isn't the be-all and end-all.

[La_Dolce_Vita]

La Dolce Vita - where do you think the line between deserving and not deserving wealth lies?

I don't know how LDV would answer, but I think you try and frame the issues over narrowly.

 

There is tendency for wealth to accumulate so rich get richer and poor get poorer, so this ends up being highly concentrated in the hands of a very few. Ultimately the country's economy suffers. This will generally happen when there is no 'redistribution of wealth'. e.g. raising minimum wage generally results in an increase in GDP; people have more disposable income, etc. etc.

 

Chinahand I'm sure you're familiar with the 'tragedy of the commons' - where individual self-interest can ultimately prove to be contrary to everyone's long term interests (even those who gain in short term). Notionally then one might then draw a line between 'toxic' and healthy wealth generation and accumulation.

 

Arguably 'non-deserving wealth' is that which a person would not otherwise keep in a non-toxic system (as perhaps notionally in a system where everyone was acting in enlightened self-interest). In simple terms it is wealth obtained and retained through being a freeloader.

 

What you do about this is a whole other question. But one of the issues is where wealthy use offshoring for purposes of freeloading. Everyone in IoM may benefit short-term, but this may be at the expense of the country the person is 'leaving' / sheltering from. You could say that IoM is just being competitive, and the UK or wherever are capable of dealing with their own 'loopholes'. You could also apply the same principles to argue that IoM is freeloading, and that this is undeserved - or at least an unsustainable and perhaps even ultimately a counter-productive economic strategy which will ultimately go tits up to everyone's cost.

 

Your last paragraph is my line of thinking exactly.

 

All I meant about 'deserving' is the rich have done nowhere near enough work or achieved anything worthy enough to warrant massive salaries, incomes, and assets that they own. When I consider that often all that has generated this wealth is a knack of understanding the system and being an entrepreneur. They have probably done no more hard work than most people, yet they are far far richer than them, this is wrong.

 

Footballers or writers, their efforts do not deserve the resulting millions which they have received. Considering so many in society struggle with money, due to bad pay, yet work their arse off it really rubs it in to have a footballer earning millions. But it is the system I have the issue with rather than the individual rich in the sense that if you do set-up a business that does very well or you do inherit money any wealth is seen to be deserved as it arises out of your property, your assets, or your mind.

 

Capitalism (in terms of how the global economy works today) has a lot of problems. And you are right the communist party in China, but that's state socialism for you, bureacrats at the top making the decisions. I don't quite understand how a wage system could possibly work a socialist state. Far better than banish the wage system.

 

the operative word is wealth creation rather than wealth distribution

 

Whereas I see distribution, not geographically but socially, as being equally as important. While the current system creates wealth far too much of that wealth is under the ownership and control of the few and the rich. But it is workers who produce this wealth yet they are not given the opportunity the benefit fully from it, in that given the workers DO the work but get paid far less than what their work is worth.

 

BUT as you say it is for the UK to make its own tax policy and the idea that you can stop money and people rellocating is pretty self defeating.

 

I understand what you say about it being self-defeating. Yet if all nations undercut each other the richer peoples of the world would be constantly relocating, earning even vaster amounts of money, and serving to only increase the dispartity between the rich and the rest.

 

Wealth in a globalized world is about creating ideas and realizing those ideas as efficiently as possible around the world.

 

What do you mean by wealth? It would be helpful to know exactly what you mean before I answer.

 

Also I believe trends in social mobility are also positive globally the world - here the myth of the American dream is being broken on the reality of a North European focus on education and universal access.

 

Yes, it may be true that social mobility is improving but the level of mobility for the middle classes far exceeds that of the working.

 

In absolute terms the resources available to the less well off segments of a particular society are growing all the time

 

And yes I would agree, however, the predicament of the worker being a wage slave is no different. So although wealth may increase, inequality of wealth will remain stark.

Whilst wage systems and ownership of property (with its concomitant protection from the state) exist there can only be a system where you have such broad ranges of wealth possession and control.

[Sebrof]

Yes, it may be true that social mobility is improving but the level of mobility for the middle classes far exceeds that of the working.

 

That's really not true. Since WW2, working class people in the British Isles (and elsewhere) have seen a much bigger increase in their incomes and living standards than middle class people.

 

S

[Moghrey Mie]

The effect it has for me is to make it even more clear that income tax is not a social responsibility that everyone must meet. I say that on the assumption that this cap is a cap on the super-rich being told that they don't have to contribute t paying for government.

 

If the rich few can escape from the 'social responsibilities' that the rest are told to meet and everyone thinks this is ok, then I hope we have a more understanding attitude to those amongst us who are also tax dodgers, benefit fraudsters, and thieves who may steal from such people. If some people don't have to pay for government, why should you!

 

I don't agree with the tax cap and agree with most of what you say but I think the idea is more along the lines that after paying tax up to £100k they consider that you've contributed enough to society. I think the idea of attracting the mega rich is something to do with VAT returns but I could be wrong as I'm not that finance savvy.

 

Sorry to confused anyone who didn't see my original post. I posted and then edited as I wasn't sure what was meant by the 100k tax cap. But if it is a cap on income tax for people who earn more than 100k then that is my stance on it.

 

Though I wonder what sort of ridiculous salary someone would be earning to have to pay more than 100k? That is a huge amount to pay.

 

 

People like this don't earn salaries like you and me. They are 'high net worth individuals' who have incomes.

Whatever their income they only have tp pay £100,000 in tax.

Why should pensioners have to pay their correct share of tax if these guys don't`?

[Moghrey Mie]

As I have been involved in doing some work on this over the past few months the following may help those of you who dont appear to have grasped this tax scenario.

 

This 100K tax cap is in relation to the ammount of tax paid and not your income ie maximum tax to be paid by an IOM Resident is 100k. Tax is not just paid on your yearly earnings but your income from all sources such as interest and investments, so you dont need just to be earning as a salary 750K per year as a salary to hit the max tax cap.

Dont underestimate the benefit to a high net worth individual of moving here. For example in a recent player transfer to Manchester City it was estimated that Robinios wages would reduce from 6 million to 4 million due to tax.

 

The benefit to the Isle of Man is massive and the 100K that our economy gets is peanuts in the scope of things. VAT is the big area we benefit from and that has nothing to do with what they spend when they are here but the new arrangement with the UK Government on our VAT reciepts which is now based on our GDP. Therefore a high wealth individual who is worth say 20 million will produce approx 1 million in additional VAT reciepts.

 

On paper this 100K tax initiative could be a little gold mine for the Islands Economy but as per usual there is a serious problem in that these individuals who want to move here cant find suitable properties to buy and our Planning Department do not see the granting of planning permission for large mansions as being in the National Interest. So unless we get some joined up Government this 100K tax initative will fail.

 

That's very interesting - thank you. But I don't fully follow the VAT argument. Are you saying that dividends and interest remitted to the IOM count towards GDP for the purposes of this VAT agreement? Doesn't sound very domestic to me.

 

S

 

But in the Area Plan For the South DLGE does ask a question about 'substantial houses in the countryside.' ( page 18 ISSUE 4 Sites for larger houses)

 

No doubt the estate agents will be saying there is a desperate need for mansions with extensive grounds for 'high net worth individuals' .

[Snaipyr]

Interesting article about the effects of all this tax dodging

 

http://groups.yahoo.com/group/celtic_league/message/2608

[Bananaman]

I'm as poor as a church mouse me and have come from a very hard working family, I've also married a very hard working proffesional. Still not in the league of buying stuff as tax right offs though. Say I won this

 

http://www.national-lottery.co.uk/player/i...o?info=euroinfo

 

 

On Friday, obviously I'll chuck a few five pound notes to my family, the rest will be spent on houses in Provence, Lombardy, Sintra, to name but a few.

 

 

Will I, a former loser, become the vile rich?

[Sebrof]

Interesting article about the effects of all this tax dodging

 

http://groups.yahoo.com/group/celtic_league/message/2608

 

Some of these countries have punitive levels of income tax, which is the motor that drives tax evasion. They would be better off finding other ways to raise revenue. When I lived in Tanzania, most government revenue came from beer duty.

 

A flat rate of income tax of 20% throughout the world would kill tax evasion overnight. You could always impose additional taxes on real property which would catch the rich and be impossible to evade. For reasons that escape me, council tax in the UK is capped, so somebody in a palace pays no more than somebody in a four bedroom house. I'd change that pretty quickly if I were Bruin.

 

S

[Bambster]

Sorry but only the poor complain. Come be my Tiny-Tim underneath my window I'll throw coins at you, some might be attached to bricks but your impoverished anyway and shan't be missed and my car won't be scratched with your villianous ways, scrote.

[Skeddan]

Interesting article about the effects of all this tax dodging

 

http://groups.yahoo.com/group/celtic_league/message/2608

Thanks for that Snaipyr. 'Death and Taxes: the true toll of tax dodging' (May 2008) is well worth looking at. It raises some significant issues re multinationals, neo-colonial exploitation, foreign aid, and the role of tax havens.

 

When I lived in Tanzania, most government revenue came from beer duty.

I was struck by the report's discussion of gold mining revenue (or lack of it) in Tanzania.

 

Mr Kabwe, the MP who is currently on the review commission, spells out the implications: ‘Under normal circumstances, if all taxes were paid, if no gold was undervalued and if there were no over-declaration of total cost, this year we should get slightly more than what the donors give us.’ Mr Lissu thinks taxpayers in the donor countries should insist their countries stop picking up the bill for the mining companies: ‘It is just common sense for citizens to demand their governments stop subsiding African countries when these countries have the resources to lead them out of the deep poverty in which they exist.’

 

Professor Shivji thinks it is more important that Tanzania regains its rightful revenues to correct the relationship with the donors. ‘What the donors give is peanuts compared to the wealth that goes out. The taxes ordinary UK citizens are paying just allow multinationals to make huge profits. You give money to your government, which gives that money to Africa with strings attached.’

July 2008:

 

A Council of Ministers report following a review of current arrangements was published last week. It includes a new policy statement declaring that CoMin is 'committed to the Isle of Man being a responsible jurisdiction, which is able to contribute to the global fight against poverty in the developing world'.

 

the report identifies a number of changes to help the Overseas Aid Committee manage its growing budget. On future spending, CoMin has agreed a target of achieving a funding level of 0.7 per cent of gross government income by 2015, which would take the overseas aid budget up to £8.4 million.

 

However, the report says meeting this target by 2015, which would mean an overseas aid budget of £33 million in that year, is 'unlikely to be achievable without the requirement to increase taxation and/or reduce spending on other public services.'

 

The report will be laid before Tynwald next week for the information of members, but is not scheduled for debate.

http://www.iomtoday.co.im/news/Overseas-ai...ease.4257205.jp

[Sebrof]

Interesting article about the effects of all this tax dodging

 

http://groups.yahoo.com/group/celtic_league/message/2608

Thanks for that Snaipyr. 'Death and Taxes: the true toll of tax dodging' (May 2008) is well worth looking at. It raises some significant issues re multinationals, neo-colonial exploitation, foreign aid, and the role of tax havens.

 

When I lived in Tanzania, most government revenue came from beer duty.

I was struck by the report's discussion of gold mining revenue (or lack of it) in Tanzania.

 

There is a beautifully simple answer to this.

 

If mining companies in Tanzania are claiming to make a loss, Tanzania should nationalise the companies with compensation based on reported profits - in other words, not much.

 

S

[Skeddan]

There is a beautifully simple answer to this.

 

If mining companies in Tanzania are claiming to make a loss, Tanzania should nationalise the companies with compensation based on reported profits - in other words, not much.

Read the report. The mining companies inflate costs and declare minimal profits (but same principle applies). However why don't they do this? Well look at what happens when the issue is even raised by an MP. It rather looks as if the govt is in the pocket of the corporations - and that foreign aid only adds to that problem. Is there a beautifully simple answer to that?

[Sebrof]

There is a beautifully simple answer to this.

 

If mining companies in Tanzania are claiming to make a loss, Tanzania should nationalise the companies with compensation based on reported profits - in other words, not much.

Read the report. The mining companies inflate costs and declare minimal profits (but same principle applies). However why don't they do this? Well look at what happens when the issue is even raised by an MP. It rather looks as if the govt is in the pocket of the corporations - and that foreign aid only adds to that problem. Is there a beautifully simple answer to that?

 

 

Corruption is the scourge of Africa, at every level. In (British) colonial days government employees were paid a living wage. After independence, wages were not increased in line with inflation, so now the monthly pay of people like customs officers might buy them a loaf of bread if they are lucky.

 

So everyone is on the take just as a matter of survival. And, of course, ministers are the most corrupt of all.

 

S

[manshimajin]

What would the effect be of setting income tax at the 10% rate for all income levels and not having a higher band with a 'cut-off' level? I understand that a number of countries have introduced one-band tax systems.

 

The £100,000 income tax cap (or £200,000 for couples) may attract a few very high net worth people to come here as opposed to Monaco or Gibraltar etc.. If we had a lower rate of tax applying to all income would this attract more people on middle incomes and thus increase the tax yield more? Would it attract or scare off the VHNW people?

 

The government accounts indicate that income tax revenue makes up just over 25% of all revenue received. I can't ascertain how much of the £159 million is collected at the 10% rate and how much at the 18% rate

 

For the economy to continue to prosper could it be a better strategy to attract more people with reasonable incomes who would all be contributing to VAT as well as income tax rather than just a few VHNW people?