a post by Torsten Bell for the Resolution Foundation blog
Eras of Britain’s political economy come and go. They ebb and flow, driven by political and economic cycles. Sometimes shifts are hard to see at the time, particularly when they are obscured by the political fog of war. Or Brexit, as it’s currently known. But noticed or not, the financial year starting this Saturday will mark the end of an era – bringing the curtain down on the post-financial crisis austerity of David Cameron and George Osborne.
It will mark the end of an era because it will be the last year we see the three components of the post-crisis economic policy framework in action – cuts to many public services, a retrenchment of social security, and significant income tax cuts that increase the heavy lifting required of the first two.
On public services the year to come is the final one of George Osborne’s Autumn 2015 spending review. This means unprotected departments, not prioritised like the NHS, continuing to see major cuts. The Ministry of Justice and HMRC both face cuts in spending per capita of just over 8 per cent, on top of reductions of 48 and 37 per cent respectively since 2009-10.
On Saturday the Income Tax Personal Allowance (PTA) and Higher Rate Threshold (HRT) will increase to £12,500 and £50,000 respectively, at a cost of £2.8 billion. These build on a series of such tax cuts since 2011. This year’s will, however, be particularly heavily skewed towards higher earners – with the large HRT rise taking up almost half the long-run cost.
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Showing posts with label taxation. Show all posts
Showing posts with label taxation. Show all posts
Wednesday, 10 April 2019
Monday, 25 March 2019
Taxing the rich: Compliance and fairness in community-based taxation – lessons from Paris in the middle ages
a column by Al Slivinski and Nathan Sussman for VOX: CEPR’s Policy Portal
The problem of tax compliance is as old as the levying of taxes. Innovations in tax administration that induce high compliance rates at reasonable cost are extremely important to governments.
This column demonstrates how the taille, a tax collection mechanism from medieval Paris, raised compliance by turning the social cost of tax evasion into a private one. It offers a tax collection model that is still relevant to governments today.
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The problem of tax compliance is as old as the levying of taxes. Innovations in tax administration that induce high compliance rates at reasonable cost are extremely important to governments.
This column demonstrates how the taille, a tax collection mechanism from medieval Paris, raised compliance by turning the social cost of tax evasion into a private one. It offers a tax collection model that is still relevant to governments today.
Continue reading
Monday, 11 February 2019
Death and taxes: Political violence shapes local fiscal institutions and state building
a column by Rafael Ch, Jacob Shapiro, Abbey Steele and Juan F. Vargas for VOX: CEPR’s Policy Portal
It is widely accepted that war between states can lead to increased fiscal capacity. Yet, there is no similarly clear, historically consistent accounting of how civil wars have affected state capacity and tax revenues.
Using recent evidence from Colombia, this column shows that municipalities affected by internal conflict have tax institutions consistent with the preferences of the parties that have managed to inflict more violence in the past. Internal armed conflict can help interest groups capture municipal institutions for their own private benefit, impeding state-building.
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It is widely accepted that war between states can lead to increased fiscal capacity. Yet, there is no similarly clear, historically consistent accounting of how civil wars have affected state capacity and tax revenues.
Using recent evidence from Colombia, this column shows that municipalities affected by internal conflict have tax institutions consistent with the preferences of the parties that have managed to inflict more violence in the past. Internal armed conflict can help interest groups capture municipal institutions for their own private benefit, impeding state-building.
Continue reading
Tuesday, 15 January 2019
Ending Global Poverty: Why Money Isn't Enough
an article by Lucy Page (Massachusetts Institute of Technology, Cambridge, USA) and Rohini Pande (Harvard Kennedy School of Government, Cambridge, USA) published in Journal of Economic Perspectives Volume 32 Number 4 (Fall 2018)
Abstract
Between 1981 and 2013, the share of the global population living in extreme poverty fell by 34 percentage points.
This paper argues that such rapid reductions will become increasingly hard to achieve for two reasons.
First, the majority of the poor now live in middle-income countries where the benefits of growth have often been distributed selectively and unequally.
Second, a reservoir of extreme poverty remains in low-income countries where growth is erratic and aid often fails to reach the poor.
If the international community is to most effectively leverage available resources to end extreme poverty, it must ensure that its investments in institutions and physical infrastructure actually provide the poor the capabilities they need to craft an effective pathway out of poverty. We term the human and social systems that are required to form this pathway "invisible infrastructure" and argue that an effective domestic state is central to building this.
By corollary, ending extreme poverty will require both expanding state capacity and giving the poor power to demand reforms they need by solving agency problems between citizens, politicians, and bureaucrats.
JEL Classification: F35, H23, I32, I38, O15
Full text (PDF 28pp)
Abstract
Between 1981 and 2013, the share of the global population living in extreme poverty fell by 34 percentage points.
This paper argues that such rapid reductions will become increasingly hard to achieve for two reasons.
First, the majority of the poor now live in middle-income countries where the benefits of growth have often been distributed selectively and unequally.
Second, a reservoir of extreme poverty remains in low-income countries where growth is erratic and aid often fails to reach the poor.
If the international community is to most effectively leverage available resources to end extreme poverty, it must ensure that its investments in institutions and physical infrastructure actually provide the poor the capabilities they need to craft an effective pathway out of poverty. We term the human and social systems that are required to form this pathway "invisible infrastructure" and argue that an effective domestic state is central to building this.
By corollary, ending extreme poverty will require both expanding state capacity and giving the poor power to demand reforms they need by solving agency problems between citizens, politicians, and bureaucrats.
JEL Classification: F35, H23, I32, I38, O15
Full text (PDF 28pp)
Friday, 4 January 2019
How wealth taxes can raise billions more without scaring any horses
a post by Torsten Bell and Adam Corlett for the Resolution Foundation blog
Raising taxes is never easy. Raising taxes with the government’s slim parliamentary majority is harder still. Raising taxes on wealth in those circumstances, given our diverging senses of fairness is… not a walk in the park. But that doesn’t mean it doesn’t need doing, and the good news is that significant progress can be made despite these constraints.
There are three reasons it is needed. First, one of the biggest challenges facing our country is how to fund the rising cost of public service provision as the population ages. This demographic headwind and wider health cost pressures are set to increase the price tag of the current welfare state by £36 billion a year by 2030, and £84 billion by 2040. Crucially this is the cost of paying for what we’ve already got – not all the extensions to our welfare state, from extra childcare to badly needed social care provision, that are often called for. This isn’t just an issue for the future – managing these cost pressures and demand for new services, against the backdrop of a decade of austerity, will be exactly the challenge the late 2019 Spending Review will have to wrestle with (and changes to the accounting of student loans certainly won’t help the Chancellor).
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Raising taxes is never easy. Raising taxes with the government’s slim parliamentary majority is harder still. Raising taxes on wealth in those circumstances, given our diverging senses of fairness is… not a walk in the park. But that doesn’t mean it doesn’t need doing, and the good news is that significant progress can be made despite these constraints.
There are three reasons it is needed. First, one of the biggest challenges facing our country is how to fund the rising cost of public service provision as the population ages. This demographic headwind and wider health cost pressures are set to increase the price tag of the current welfare state by £36 billion a year by 2030, and £84 billion by 2040. Crucially this is the cost of paying for what we’ve already got – not all the extensions to our welfare state, from extra childcare to badly needed social care provision, that are often called for. This isn’t just an issue for the future – managing these cost pressures and demand for new services, against the backdrop of a decade of austerity, will be exactly the challenge the late 2019 Spending Review will have to wrestle with (and changes to the accounting of student loans certainly won’t help the Chancellor).
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Tuesday, 11 December 2018
Why paying tax can be good news for companies
a post by Colin Mayer for the OUP blog
For the past 35 years, Ipsos MORI, the UK market research company, has undertaken a survey of which professions in Britain people trust. Each year, they ask 1,000 people whether they trust people in different professions to tell the truth.
Every year, close to the bottom come business leaders, just above estate agents, professional footballers, journalists, and politicians, below trade union leaders and “the man in the street”, and usually even below bankers.
Mistrust in business is pervasive, persistent and profound.
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Building Glass Architecture by Mikes Photos. CC0 via Pixabay
For the past 35 years, Ipsos MORI, the UK market research company, has undertaken a survey of which professions in Britain people trust. Each year, they ask 1,000 people whether they trust people in different professions to tell the truth.
Every year, close to the bottom come business leaders, just above estate agents, professional footballers, journalists, and politicians, below trade union leaders and “the man in the street”, and usually even below bankers.
Mistrust in business is pervasive, persistent and profound.
Continue reading
Monday, 29 October 2018
Taxation and innovation in the 20th century
a column by Ufuk Akcigit, John Grigsby, Tom Nicholas and Stefanie Stantcheva for VOX: CEPR’s Policy Portal
Understanding how taxation influences innovation is of central importance to create investment incentives for R&D, yet our knowledge remains limited due to a lack of data, especially covering a long period of time.
This column uses newly constructed datasets from the 20th century to examine the effects of both personal and corporate income taxation on inventors, as well as on firms that do R&D. It finds consistently negative effects of high taxes on innovation over time as well as on individual inventors and firms.
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Understanding how taxation influences innovation is of central importance to create investment incentives for R&D, yet our knowledge remains limited due to a lack of data, especially covering a long period of time.
This column uses newly constructed datasets from the 20th century to examine the effects of both personal and corporate income taxation on inventors, as well as on firms that do R&D. It finds consistently negative effects of high taxes on innovation over time as well as on individual inventors and firms.
Continue reading
Monday, 22 October 2018
A Wealth of Difference: Announcing the IPPR Commission on Economic Justice discussion paper on reforming the taxation of wealth
A Commission on Economic Justice discussion paper
Carys Roberts, Grace Blakeley and Luke Murphy in an IPPR newsletter
The UK is a wealthy nation but that wealth is very unevenly distributed. This has negative implications for both economic prosperity and justice. These issues are set to become more important as technological change, stagnating wages and rising house prices increase the income and gains that can be made from wealth.
The UK's system of wealth taxation currently fails to tackle these issues. In fact, it frequently exacerbates them by creating opportunities for avoidance, distorting investment decisions, poorly capturing wealth transfers and under-taxing income from assets, particularly housing. This is unjust.
The paper makes five recommendations which together would amount to a transformation of the tax treatment of wealth in the UK:
Together, these measures would make the UK's tax system both more just and more economically efficient – reducing wealth inequality and helping to build a tax system fit for the 21st century.
Full text (PDF 44pp)
Carys Roberts, Grace Blakeley and Luke Murphy in an IPPR newsletter
The UK is a wealthy nation but that wealth is very unevenly distributed. This has negative implications for both economic prosperity and justice. These issues are set to become more important as technological change, stagnating wages and rising house prices increase the income and gains that can be made from wealth.
The UK's system of wealth taxation currently fails to tackle these issues. In fact, it frequently exacerbates them by creating opportunities for avoidance, distorting investment decisions, poorly capturing wealth transfers and under-taxing income from assets, particularly housing. This is unjust.
The paper makes five recommendations which together would amount to a transformation of the tax treatment of wealth in the UK:
- All income from wealth should be taxed under the income tax schedule.
- Inheritance tax should be abolished and replaced with a lifetime donee-based gift tax.
- Non-domiciled status should be removed and trusts reformed to be more transparent.
- Property taxes should be reformed through the replacement of council tax with an annual property tax.
- Business rates should be replaced with a land value tax.
Together, these measures would make the UK's tax system both more just and more economically efficient – reducing wealth inequality and helping to build a tax system fit for the 21st century.
Full text (PDF 44pp)
Monday, 14 May 2018
Tax evasion and inequality
a column by Annette Alstadsæter, Niels Johannesen and Gabriel Zucman for VOX: CEPR’s Policy Portal
Tax records are often used to gauge the concentration of wealth and income in a society. However, if the rich dodge taxes more than the poor, tax records will underestimate inequality. This column uses Scandinavia as an example to demonstrate how tax evasion varies with wealth: the top 0.01% richest households in Scandinavia evade about 25% of the taxes they owe by concealing assets and investment income abroad. The very rich are able to do this simply because they have access to wealth concealment services. To reduce top-end evasion, what is essential is to shrink the supply of such services.
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Tax records are often used to gauge the concentration of wealth and income in a society. However, if the rich dodge taxes more than the poor, tax records will underestimate inequality. This column uses Scandinavia as an example to demonstrate how tax evasion varies with wealth: the top 0.01% richest households in Scandinavia evade about 25% of the taxes they owe by concealing assets and investment income abroad. The very rich are able to do this simply because they have access to wealth concealment services. To reduce top-end evasion, what is essential is to shrink the supply of such services.
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10 policies if you think you might want a Universal Basic Income but aren’t sure
a post by Adam Corlett for the Resolution Foundation blog
Universal Basic Income (UBI) is the policy idea du jour, especially among Labour, Lib Dem, SNP and Green members. But those three words by themselves are not a policy.
The concept draws support for a range of different – and sometimes contradictory – reasons, and a UBI could be designed in countless ways with vastly different results. In addition, the debate often fails to engage with the real-life benefits system we already have.
To help clarify which aspects of a UBI really matter to you, and which aspects may not be so appealing, here’s a set of thought experiments: what a UBI manifesto for incrementalists might look like (not all of them necessarily welcome). It shows that there are good ideas to be taken from the concept and the motivations behind it, but that UBI may not be the only or best way to achieve particular goals.
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Universal Basic Income (UBI) is the policy idea du jour, especially among Labour, Lib Dem, SNP and Green members. But those three words by themselves are not a policy.
The concept draws support for a range of different – and sometimes contradictory – reasons, and a UBI could be designed in countless ways with vastly different results. In addition, the debate often fails to engage with the real-life benefits system we already have.
To help clarify which aspects of a UBI really matter to you, and which aspects may not be so appealing, here’s a set of thought experiments: what a UBI manifesto for incrementalists might look like (not all of them necessarily welcome). It shows that there are good ideas to be taken from the concept and the motivations behind it, but that UBI may not be the only or best way to achieve particular goals.
Continue reading
Friday, 11 May 2018
Should electronic cigarette producers be prohibited from advertising and be taxed?
a column by Michael Grossman, Dhaval Dave, Henry Saffer, Don Kenkel and Daniel Dench for VOX: CEPR’s Policy Portal
In 2016, the US Food and Drug Administration extended its authority over tobacco products to include e-cigarettes. This column argues that advertising restrictions and taxes on e-cigarettes could discourage people from quitting traditional cigarettes. However, little is known about the long-term health consequences of the use of e-cigarettes, so it is too early to conclude that unrestricted advertising of e-cigarettes and low or no federal taxation would advance public health.
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In 2016, the US Food and Drug Administration extended its authority over tobacco products to include e-cigarettes. This column argues that advertising restrictions and taxes on e-cigarettes could discourage people from quitting traditional cigarettes. However, little is known about the long-term health consequences of the use of e-cigarettes, so it is too early to conclude that unrestricted advertising of e-cigarettes and low or no federal taxation would advance public health.
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Friday, 23 March 2018
Changes to taxation of payments in lieu of notice
I was reading a recent blog post from Mondaq which advised employers that as from April 2018 all payments in lieu of notice will be taxable.
I am not able to copy any part of Mondaq’s post but decided that it would be good to visit some more open sources to see what information I could glean.
Understanding PILON: Payment in lieu of notice (from ACAS) does what it says – explains what the payment is, when it can/should be paid but does not mention tax.
Proposed Changes to UK Law on the Taxation of Payments In Lieu Of Notice from the National Law Review sets the proposed changes out in language I can understand. I like that it is not written in legalese.
PS. The search term I finally used in DuckDuckGo, "changes to UK taxation on PILONs" brought up a lot of sources so you may like to try for yourself if the above two are not sufficiently explanatory.
I am not able to copy any part of Mondaq’s post but decided that it would be good to visit some more open sources to see what information I could glean.
Understanding PILON: Payment in lieu of notice (from ACAS) does what it says – explains what the payment is, when it can/should be paid but does not mention tax.
Proposed Changes to UK Law on the Taxation of Payments In Lieu Of Notice from the National Law Review sets the proposed changes out in language I can understand. I like that it is not written in legalese.
PS. The search term I finally used in DuckDuckGo, "changes to UK taxation on PILONs" brought up a lot of sources so you may like to try for yourself if the above two are not sufficiently explanatory.
Thursday, 22 March 2018
Digital revolutions in public finance
a column by Sanjeev Gupta, Michael Keen, Alpa Shah and Geneviève Verdier for VOX: CEPR’s Policy Portal
Digitalisation has vastly increased our ability to collect and exploit the information that governments use to implement macroeconomic policy. The column argues that the ability of governments to use the vast amounts of information held in the private sector on financial transactions are already making fiscal policy more efficient and effective. Problems of access to digital technology, cybersecurity risks, and the difficulty of organisational change in the public sector may slow the pace at which these opportunities are exploited.
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Digitalisation has vastly increased our ability to collect and exploit the information that governments use to implement macroeconomic policy. The column argues that the ability of governments to use the vast amounts of information held in the private sector on financial transactions are already making fiscal policy more efficient and effective. Problems of access to digital technology, cybersecurity risks, and the difficulty of organisational change in the public sector may slow the pace at which these opportunities are exploited.
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Tuesday, 27 February 2018
The size and composition of fiscal adjustment matter for inequality
a column by Elva Bova, Tidiane Kinda and Jaejoon Woo for VOX: CEPR’s Policy Portal
Understanding the distributional consequences of fiscal adjustment measures is important for equity, but also to ensure the sustainability of the measures. This column shows that fiscal adjustments increase inequality, including through unemployment. Spending-based adjustments worsen inequality more significantly than tax-based adjustments. Progressive taxation and targeted social benefits and subsidies introduced in the context of a broader decline in spending can help offset some of the distributional impact of fiscal adjustments.
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Understanding the distributional consequences of fiscal adjustment measures is important for equity, but also to ensure the sustainability of the measures. This column shows that fiscal adjustments increase inequality, including through unemployment. Spending-based adjustments worsen inequality more significantly than tax-based adjustments. Progressive taxation and targeted social benefits and subsidies introduced in the context of a broader decline in spending can help offset some of the distributional impact of fiscal adjustments.
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Friday, 16 February 2018
Seven key takeaways on the level, profile and distribution of Britain’s £12.8 trillion of wealth
a post by Conor D'Arcy for the Resolution Foundation blog
We get monthly updates on pay and authoritative data on household incomes every year. But we have to wait two years for a detailed breakdown of what’s happening to wealth across Britain. Here are seven key takeaways from the latest data published today and what it tells us about changes in the level, profile and distribution of Britain’s wealth.
In brief:
http://www.resolutionfoundation.org/media/blog/seven-key-takeaways-on-the-level-profile-and-distribution-of-britains-12-8-trillion-of-wealth/
In summary, Britain has lots of wealth – and lots more than it did a decade ago.
But Britain is also a country of major wealth divides that cut across income levels, regions and generations. What’s most remarkable of all, though, is the lack of debate about whether these trends are good or bad – and what policy can do to change it.
Given the huge economic pressures Britain faces in the coming years and decades, it’s high time we had a proper debate about the scale, distribution and taxation of our wealth.
That’s a debate our Intergenerational Commission will be looking to spark in the coming weeks and months.
We get monthly updates on pay and authoritative data on household incomes every year. But we have to wait two years for a detailed breakdown of what’s happening to wealth across Britain. Here are seven key takeaways from the latest data published today and what it tells us about changes in the level, profile and distribution of Britain’s wealth.
In brief:
- Britain has excelled at generating wealth
- But that wealth is very unequally spread
- The lowest-income households fared worst in recent years
- Londoners’ wealth has galloped ahead of the rest of Britain
- But there are wide inequalities within London too
- Rising wealth has not been equally shared across the generations
- Auto-enrolment has helped but the fall in pensions inequality pre-dates it
http://www.resolutionfoundation.org/media/blog/seven-key-takeaways-on-the-level-profile-and-distribution-of-britains-12-8-trillion-of-wealth/
In summary, Britain has lots of wealth – and lots more than it did a decade ago.
But Britain is also a country of major wealth divides that cut across income levels, regions and generations. What’s most remarkable of all, though, is the lack of debate about whether these trends are good or bad – and what policy can do to change it.
Given the huge economic pressures Britain faces in the coming years and decades, it’s high time we had a proper debate about the scale, distribution and taxation of our wealth.
That’s a debate our Intergenerational Commission will be looking to spark in the coming weeks and months.
Friday, 25 May 2012
‘Digitally excluded’ losing out as services move online
The Low Income Tax Reform group has published a new report (PDF 64pp) highlighting the growing problem of ‘digital exclusion’.
It provides new evidence that government efforts to move services and transactions online are disadvantaging older people, the disabled and the self-employed in particular.
Thanks to ICT E-Bulletin - May 2012 via Lasa knowledgebase
It provides new evidence that government efforts to move services and transactions online are disadvantaging older people, the disabled and the self-employed in particular.
Thanks to ICT E-Bulletin - May 2012 via Lasa knowledgebase
Wednesday, 4 April 2012
A taxing time for donors
via CMPO Viewpoint by Sarah Smith
First the granny tax and now the cap on higher-rate reliefs. The £50,000 cap on higher-rate reliefs – announced as a measure to reduce tax avoidance – is proving contentious because it applies to charitable giving (as well as loan relief and loss relief).
Aside from the merits or otherwise of pre-announcing caps (if you are serious about limiting tax avoidance then why give people plenty of time to re-organise their affairs?) another credibility issue is whether charitable donations really constitute a major vehicle for tax avoidance – unless this is closing a potential loophole to limit the damage from closing other loopholes.
The issue that is causing real concern however is how much damage the cap will do to major donations – exactly at a time when other government departments are looking to philanthropists to make up the shortfall from funding cuts in areas such as arts and education.
This crucial question is almost impossible to answer – at least outside HM Revenue and Customs – because it requires knowing not only how much people donate, but also how much their income is and how much they use the other reliefs. HMRC have estimated a projected total saving of £870 m in 2014-15.
Read the rest of the blog post
First the granny tax and now the cap on higher-rate reliefs. The £50,000 cap on higher-rate reliefs – announced as a measure to reduce tax avoidance – is proving contentious because it applies to charitable giving (as well as loan relief and loss relief).
Aside from the merits or otherwise of pre-announcing caps (if you are serious about limiting tax avoidance then why give people plenty of time to re-organise their affairs?) another credibility issue is whether charitable donations really constitute a major vehicle for tax avoidance – unless this is closing a potential loophole to limit the damage from closing other loopholes.
The issue that is causing real concern however is how much damage the cap will do to major donations – exactly at a time when other government departments are looking to philanthropists to make up the shortfall from funding cuts in areas such as arts and education.
This crucial question is almost impossible to answer – at least outside HM Revenue and Customs – because it requires knowing not only how much people donate, but also how much their income is and how much they use the other reliefs. HMRC have estimated a projected total saving of £870 m in 2014-15.
Read the rest of the blog post
Friday, 4 February 2011
Tax evasion
There is, as many people are aware, a vast difference between evading and avoiding but what is this difference?
Trying to get it straight in my own mind I found the following:
- The government announced a Consultation Paper in April 2004. This was the start of a new régime for “tackling tax avoidance” by requiring disclosure of “schemes” (DOTAS) which the government felt resulted in companies and individuals paying less than their fair share of tax.
The régime itself was revised from the 1 August 2006 to help distinguish between “tax avoidance” (legal but irritating to the government) and “acceptable planning” (legal and actively promoted by government).
What triggered this off in my mind was looking at the table of contents for the Public Finance Review Volume 39 Issue 1 (January 2011) which is special issue on the topic of evasion. My next visit to the British Library will be Thursday of next week so I will look at the whole issue and pick out what I think will be of interest to readers.
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