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10p tax - We will help by increasing mininum wage!
With all the bad press for the government about abolishing the 10% tax threshold, one of the ways the government said it would help the low earners is to increase the minimum wage.I don't know about anyone else, but how is this the government helping, its not the government who pays the minimum wage its businesses! Small businesses can no more afford to pay more to staff than the employees can to pay more tax. The main winner in this situation is the treasury!
Please discuss how would this affect you and does anyone have any ideas on how to fix this terrible situation.
Allan Pearson
www.payepeople.co.uk
Allan Pearson
Number of comments: 11
AccountingWEB.co.uk 6-May-2008
Categories: Tax Features
Times read: 3035
by 2 user(s)
I have signed up to the petition,and sincerely hope that notice is taken. For too long NMW has massiveley outstripped inflation to the detrement of my business. Operating in the retail sector is extremely difficult at the moment particularly when we rely on high volumes to subsidise low margins. For us, we have no choice but to increase all staff bandings rate of pay in lne with NMW, otherwise the sales assistants would soon be earning more than store managers!
You deserve a pat on the back for exactly predicting ( or suggesting ) what the Treasury would do. No doubt it cost them ( or should I say, us - the Taxpayer ) tens of thousands in consultancy fees to arrive at this solution, when they could have asked you for free.
I was thrilled to see that the Chancellor took my suggestions on board. I have many, many more for him.............
Just read on the BBC News website that Personal Allowances are to be increased by £600.
http://news.bbc.co.uk/1/hi/uk_politics/7397705.stm
...of a U-turn on the 10p band is the simplest and fairest, with one exception. Why on earth is there any need to cut benefits to pay for it ? That in itself penalises the poor.
If the government can afford £50 billion to bail out Northern Rock, and then umpteen more billions to bail out other banks, and can also afford to keep an unsustainable proportion of our armed forces in Iraq and Afghanistan - then it can certainly afford not to impose this tax increase on the poor.
If, nevertheless, it remains unable to balance it books, here are a few more suggestions... (1) a small extra windfall tax on oil companies who are raking in the profits with current oil prices: their production costs have not increased substantially; (2) a few pence on the 40% tax band - or a 50% tax band for those on £100K upwards; (3) do a u-turn also on the main corporation tax rate and put it back to 30% (at the same time, why not also ease the plight of small companies by putting theirs back to 19%?).
In their 1997 manifesto, New Labour said:
"Our long-term objective is a lower starting rate of income tax of ten pence in the pound. Reducing the high marginal rates at the bottom end of the earning scale - often 70 or 80 per cent - is not only fair but desirable to encourage employment."
Under the heading "A new politics" the same manifesto also said:
"The Conservatives' broken promises taint all politics. That is why we have made it our guiding rule not to promise what we cannot deliver; and to deliver what we promise."
Hmmm...
Annual wage of someone on NMW is around £10.5k.
Since amount of tax is now doubled due to doubling of rate, doesn't that mean if the NMW is increased to benefit the worker, HMRC will get a proportionately larger amount of tax take as well ?!
Restore the progressive 10% rate !!
The first week of the 10p tax hit we nearly had a riot in the factory from our part time staff.
We made every attempt to explain the change to the tax system but we still got the blame for taking the extra tax off them.
We even went through an exercise of adjusting hourly rates but it was never going to work.
Never mind Gordon can increase the minimum wage rate and all his problems will be solved - can we pass on the cost increase please.
What a farce.
They could increase the personal allowance and then make a similar adjustment at the basic rate top end and also adjust tax credits down slightly so that low income families are better off but middle Britain and higher earners are not affected.
This is what they did for the pensioners after all - they got a massive increase in PAs this year.
Surely it's better for people not to have to pay the tax in the first place rather than pay it and then get it back through tax credits.
But no, this government likes handouts.
I would just reinstate the 10p band and cut benefits.
I know it is harsh, but administratively a U-turn is a no brainer. It is so much simpler then bending the benefits system back to the position as if the 10p band had never been cut.
A raise in the NMW will also increase employers NI as well as employees NI, so there is more to it than there seems at first.
Finally, I would sack the team of treasury advisors who failed to point out the fundamental basics when budget 2007 was being drafted.
I quite agree Allan andhave already posted an article on my firm's website and with the BBC on this very subject. I tried out the Number 10 website the day after the News Night interview with Mr Paxman and had the petition approved yesterday. Consequently the passing of time has made all relevant articles on this subject ancient so gaining support and awareness on this potential disaster may be difficult.
To support please go to:
http://petitions.pm.gov.uk/tenpamended/
The petition reads:
We the undersigned petition the Prime Minister to reconsider
penalising businesses to compensate those losing out due to the
withdrawal of the 10p tax band
Businesses have been hit too many times and 2008 will not be
easy. Why should the Government consider increasing the
minimum wage to single childless youngsters purely to increase
their pay packet without the Government picking up the tab.
It is time for business owners to make a stand similar to
labour back benchers to make the Prime Minister realise that
we will not be pushed around.
We are paying an increasing share of the tax burden - increases
in corporation tax from 19% to 22% so that large businesses can
pay less (30% to 28%) and like so many "tax saving" initiatives
of the past it is our administration costs that increases to
deliver these extra payments.
