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Cut employee NICs, says CBI

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10th Nov 2014
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The government should start increasing the threshold for employee national insurance contributions immediately and consider reductions in employers’ NICs in the longer term, according to the CBI.

The business group’s report “A better off Britain”, published today, said increasing the employee NIC threshold in stages to £10,500 would be more effective than increasing income tax allowances.

It calls on the government to: “Reduce NICs for employees. Start with raising the threshold for employee NICs to £10,500, the level of the income tax personal allowance in 2015/16, in steps up to 2020/21.

“Close the gap between free provision of childcare and statutory maternity pay by offering 15 hours of free childcare to all children aged one and two and by extending statutory maternity pay from 39 to 52 weeks. Aim to further increase the number of hours of free childcare in time.”

The CBI report welcomed the introduction of the employment allowance, worth up to £2,000 off an employer’s NIC bill, but said a “more ambitious” plan was needed.

“Over time, we also need to bear in mind the effect of employer NICs too, as it is a tax on jobs. It cost UK employers £61.7bn in 2013/14, which combined with employees’ contributions raised £106.6bn that year for the government … Immediate action on employee NICs will help address the squeeze in incomes – while action over the longer term on employer NICs will give employers greater scope for job creation and pay rises.”

On Friday the Treasury announced that 850,000 UK employers are benefiting from the employment allowance.

The Treasury press release quoted John Allan, national chairman of the Federation of Small Businesses, as saying: “We’re really pleased to see so many businesses already taking advantage of the employment allowance. We called on government to help small employers invest in staff, and now we see how this additional support has been spent.

“Our members have used the allowance by paying workers more, hiring new people and increasing training. It’s also good to see a quarter of those that used the allowance to hire new staff took on an apprentice.”

Replies (5)

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By ShirleyM
10th Nov 2014 12:26

....but ....

.... Employers NIC is the only tax that some companies actually pay!

Some companies (who pay little or no corporation tax) claim that the huge amounts of VAT they pay is a tax on their business (but in reality is a tax on the customer) and that their companies are paying vast sums of PAYE/NIC (but most of that is borne by the employee) and they 'manage' the profits so little, or no, corporation tax is paid ... so reducing Employers NIC will transfer the liability from employers onto the other taxpayers.

Someone has to pay the tax needed to fund the country (and the EU)!

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Replying to Accountant A:
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By mackthefork
11th Nov 2014 13:27

@ShirleyM

ShirleyM wrote:

.... Employers NIC is the only tax that some companies actually pay!

Some companies (who pay little or no corporation tax) claim that the huge amounts of VAT they pay is a tax on their business (but in reality is a tax on the customer) and that their companies are paying vast sums of PAYE/NIC (but most of that is borne by the employee) and they 'manage' the profits so little, or no, corporation tax is paid ... so reducing Employers NIC will transfer the liability from employers onto the other taxpayers.

Someone has to pay the tax needed to fund the country (and the EU)!

Given what you say about VAT, do you really believe employers are the ones who are paying employers NICs, I would disagree strongly.

Regards

MtF

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Replying to lionofludesch:
By ShirleyM
11th Nov 2014 14:00

In the end ....

mackthefork wrote:

Given what you say about VAT, do you really believe employers are the ones who are paying employers NICs, I would disagree strongly.

Regards

MtF

... the customer pays for everything, the CT, the dividends, the wages, the lot ... so I would agree with your comment if looking at the subject from a wider angle.

However, the profitable companies that avoid any form of tax are taking the benefits of trading in the UK, without paying towards any of those benefits, and leave a larger bill for everyone else. It also creates an unlevel playing field, where businesses that don't avoid tax are being undercut by the dodgers. Therefore, more businesses avoid tax, just to stay competitive, and the circle continues, with the tax tab being picked by those who cannot, or choose not, to avoid tax.

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By Mekabear
10th Nov 2014 15:23

I agree with Shirley

Its so easy to get away with not paying CT, that at least NIC forces companies to actually pay something if they employ people in the UK.

I've always thought they should lower CT (if it gets low enough hopefully it wouldn't be worth avoiding) and raise NIC, because at least if the company employs people in this country then we would get some contribution from this.

 

 

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By User deleted
11th Nov 2014 16:47

Mike Rake – CBI and other posts ….

@ShirleyM – agreed

CBI

The CBI seems to have a lot to say recently although perhaps they should look to their own before advising everyone else on the way forward

On the EU (in/out) their impartiality has been called into question because they have received more than £800,000 in funding from the European Commission over the past five years

In the past the CBI campaigned for the UK to join the Euro – a major mis-judgement which would have been a catastrophic move

To all accounts the CBI provides economic data for the EU to analyse and promote their various agendas

Mike Rake

The well-known collector of non-exec positions - where do we start with Mr Rake? The CBI, Barclays, EasyJet, McGraw Hill …..

How about his role in the Barclays Libor scandal

Bearing in mind his starter for ten as the former European, UK and International KPMG chairman one would think that his role as:

Barclays as chairman of the relevant Audit sub-committee and a member of the Risk Management and Corporate Governance sub-committees would have been a task well within his capabilities

This role included the detection and exposure of Libor wrongdoings which were ultimately his responsibility and which unfortunately he did nothing about - basically  a watchdog that was asleep on watch!

Let’s just look at Mr Rakes track record every time he gets involved with a company

$5bn lawsuit brought by the Department of Justice against credit-ratings agency, Standard & Poor’s, where Sir Mike sits on the board of parent company, McGraw-HillAt KPMG when it was fined by the US Justice Department and the Internal Revenue Service for the design, marketing, and implementation of fraudulent tax sheltersAt Barclays amid the Libor rate-fixing scandal

As the saying goes – once is unfortunate, twice is careless and three times …..

With all this in mind why do we continue to any take notice of these people?

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