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Thursday, 1 March 2012

50p tax: let's have a bit of honesty from the turkeys who, once again, say en masse they don't like Christmas

OK, I get it. Lower taxes mean more money entering the economy and this can in many cases stimulate economic growth.

I agree that lower taxes are generally good for the economy.  I just don't get why tax on a small proportion of high earners is disproportionately damaging to economic growth than general taxation levels.

Once again we see "business leaders" line up in a joint letter to say they don't like paying the new, higher rate of tax.

Only they don't. They scratch around rabidly grasping for a straw to explain how their business has been unable to grow because of the 50p tax rate.

Seriously, do these guys not employ an accountant between them? There's more than one way to pluck a turkey.

There's a slightly radical alternative for owners and major shareholders serious on re-investment in their companies.

Instead of opting to withdraw funds as salary only to be clobbered by the highest rate of tax, they could instead opt for a temporary salary cut, leaving some profit in the company to reinvest.

As a major shareholder they would then see benefit in the long term, as the value of their shareholding increases (if the re-investment was wise and did indeed as create the growth these turkeys claim).

Profits left in the company not drawn as salary would then be taxed not at 50p in the pound but around 25p or less.

Yes, no mention today of the Government's long term plan to reduce corporation tax from 28% to 24% by 2013 - surely this is a growth-friendly policy as it reduces the penalty for companies who leave profits in the company. (Usually only to be withdrawn as dividends!)

Yes I'd like to see tax rates come down to allow more money to re-enter the economy; tax rates for us all, not just the very high earners.


Bootnote: I also assume the turkeys are threatening a mass migration from the UK, but this seems to be a perennial threat so not really worth picking up on.

1 comment:

  1. Well said James.

    The real issue of course is that ploughing profits back into any business is incompatible with short-term gain and requires instead those oft-unwelcomed attributes of patience and commitment on the part of business leaders.

    The better way as you say is to raise the lowest tax threshold and thereby benefit everyone equally in cash terms.


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