A lot of Jeremy Corbyn's policies seem completely mad to me but then so do a good number of those proposed by Theresa May and, if I knew what they were, I probably would feel the same about the views of Tim Farron.
The one that is most likely to excite accountants is the Labour Party's pledge to reintroduce a 50% tax rate for income in excess of £123,000, with the 45% rate cutting in at only £80,000.
This dovetails rather nicely with the party's intention to maintain a corporation tax rate of 20% or possibly increase it during the term of the next Parliament, if they get in, which currently looks unlikely but slightly less than it did a week ago.
I am well aware that many readers will be outraged by these proposals. The argument that amuses me most is the one which says there is no point in raising income tax rates because the rich will not pay them anyway.
This intellectual argument can be followed to an obvious conclusion that there's no point in having tax at all, since people will avoid it anyway. The subtlety here is that despite the high tax rates only the rich had the ability or the nous to run rings around the taxman.
Hundreds of years of experience prove that theory is incorrect since the relatively poor struggled to avoid taxes in the long term, while even the rich make some kind of a contribution and, I would suggest, probably pay a little more when rates are higher rather than lower.
If I understand Labour’s proposals correctly, they will mean that somebody getting £100,000 will pay an extra £1,000 per annum, while a top executive earning £1,080,000 (to keep the number simple) will pay an extra £50,000.
Frankly, in the first case, this might be a little tough but is unlikely to lead to starvation. In the latter case, if someone that rich can't afford it then they need to get themselves a decent accountant. Alternatively, perhaps they should cut down on the hard drugs or accept a lifestyle that is slightly more restricted but hardly compares to a care worker trying to survive on the National Living Wage.
At a corporate level, we're talking about 2 to 3% extra, which cannot hit those making minimal profits all that hard but would not even be noticed by a multinational. Someone cynical like me might even suggest that since their effective rate is likely to be barely 1%, every little helps.
Increasing higher rate taxes should provide additional funds for the health service, education or perhaps public libraries. I doubt that these changes will make anyone emigrate, though they may leave the country for other reasons. What then is the problem?
I would love a reader to present a coherent response to this article, demonstrating why the country will be more prosperous if less tax is collected from the rich.
About The Imprudent Accountant
Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.