Tag Archives: PAYE

The taxless recovery – Flip Chart Fairy Tales

This is no ordinary recovery, according to Flip Chart Fairy Tales. Not only has it taken a hell of a long time to do not very much, it’s seen collapsing productivity and very little wage growth, even for those who appear to be highly skilled. As a result of all this, even though the economy grew at over 3 percent, tax revenues didn’t increase at the same rate.

As Ben Chu’s chart shows, most of the rise in tax revenue since the recession is due to VAT.

ByNkhCfCYAAZgJg

Record numbers of people in employment, it seems, hasn’t led to record levels of income tax.

When you break out the figures for income tax, as Michael O’Connor did earlier this week, there is a marked difference between receipts from those on PAYE and those on self-assessment.

ByTN88ZCMAAqt1l

Falling self-assessment receipts are, for the most part, a symptom of falling self-employment incomes. Around three-quarters of the employment growth since the recession has come from self employment yet between them, the self-employed are still delivering a lot less tax. We won’t see the final 2013 HMRC figures for self-employment incomes until January but these charts suggest that the spectacular fall in self-employment earnings between 2008 and 2012 hasn’t improved by much. Probably the closest estimate we have for self-employed pay since 2012 is by Laura Gardiner at the Resolution Foundation. The low tax receipts indicate that self-employed earnings may have continued to fall or are, at best, stagnating.

Screen Shot 2014-07-10 at 16.43.58

Things might be about to get worse for some of the self-employed. As Ben Dellot explains, the new Universal Credit system could leave many of them worse off. According to the RSA’s calculations, 37 percent of the self-employed earn less than the minimum income floor, which is set at around the full-time minimum wage. (That sounds about right. A study by the IFS found that 40 percent of the self-employed earn less than the minimum wage.) Not all the self-employed currently claim tax credits but those who do, and who fall below the income floor under the new system, will find their benefits cut. The self-employed now account for almost a fifth of tax credit claimants so this is likely to affect a lot of people.

Read the rest of the article on Flip Chart Fairy Tales.

Follow me on Twitter: @MidWalesMike

Join the Vox Political Facebook page.

Buy Vox Political books so we can continue
bringing you the best of the blogs!

Health Warning: Government! is now available
in either print or eBook format here:

HWG PrintHWG eBook

The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:

SWAHTprint SWAHTeBook

Vox Political needs your help!
If you want to support this site
(
but don’t want to give your money to advertisers)
you can make a one-off donation here:

Donate Button with Credit Cards

Universal Credit: Hardly universal, and no credit to anybody

Getting a bit rough, is it? Iain Duncan Smith knows his flagship Universal Credit scheme won't work - he just doesn't care.

Getting a bit rough, is it? Iain Duncan Smith knows his flagship Universal Credit scheme won’t work – he just doesn’t care.

Earlier this week, a Job Centre somewhere in Mid Wales was graced by the presence of Yr Obdt Srvt, the author of this column. It’s true; I’m a real human being and I receive certain state benefits.

Having said that, it transpired during the conversation with my advisor that I was on one less benefit than expected; the DWP had, in its wisdom, cut me off from Income Support, with “No contact”. That was the on-screen comment. They stopped it but couldn’t be bothered to tell me.

Classy.

But that’s by-the-way. The discussion ranged through the paid work that I do, my plans to expand my earnings, and my aim to get off-benefit as soon as possible -certainly “before Universal Credit comes into effect, in October”.

I said it, looked my advisor – who is, I should point out, a very nice person indeed, and therefore breaks all the rules of the DWP just by being there – in the eye, and we both had a little giggle about that one.

“That’s still right, isn’t it? In October?”

“They’re hoping.”

The conversation moved on.

Imagine my delight on Thursday evening, when I refreshed the BBC website and saw: “UNIVERSAL CREDIT PILOTS SCALED BACK”!

“The government is to scale back some of its plans to test a radical new reform to the welfare system,” the story stated. It was by James Landale, about whom I have previously complained to the BBC with regard to Tory bias, so it should be no surprise that the reason for the scaleback was buried 11 paragraphs down: “But Labour said this showed the scheme was in crisis and that the information technology needed for it was not ready.”

I turned to the newspapers for corroboration, and found it in the Independent, which put the issues right at the front of the story: “Ministers tonight significantly scaled back plans to begin piloting their controversial universal credit programme next month amid fears that the scheme is behind schedule and facing major problems.”

UC – I pronounce it “Uck” – was due to be tried out in four areas from late next month, but will now run only from a single Job Centre in Ashton-under-Lyme at that time. The three other pilot areas, in Wigan, Warrington and Oldham, won’t get started until “at least July” (it says here).

The plan is to merge around 30 benefits and tax credits into a single payment, on a tapering scale depending on a claimant’s earnings. It requires communication between computer systems belonging to the Department for Work and Pensions, HM Revenue and Customs, and employers who have to provide PAYE details (if I’ve got this right).

The scaleback is already being seen as an admission that the communications software – required for UC to succeed – doesn’t work.

There are also fears that the government doesn’t have anyone with the training or experience necessary to manage the scheme without messing it up completely and making the government look like a bunch of irresponsible fools. Again.

Needless to say, the government has denied that there is any problem. Apparently it is “sensible” to start in one area before rolling the system out elsewhere. Oh really? No attempt was made to explain why the original plan had been changed. Because the answer is too embarrassing?

This plan is a total disaster.

There can be only two reasons the government is pushing forward with it. Firstly, Iain Duncan Smith has said it will happen so it will happen, no matter how badly past-deadline and over-budget it turns out to be.

Secondly, if it doesn’t work, the only people who’ll be inconvenienced are poor people who are on benefits – and they won’t be able to take legal action over it because Legal Aid will have been cut for civil cases.

That’s why I want to be out of the blast zone when this one hits.

I fear for my future – and that of everyone else who will be caught up in this debacle – if I’m not.

Osborne-created tax loophole diddles the UK out of hundreds of millions

A tax avoidance loophole specially created by George Osborne, the UK Chancellor, last year means that water companies have played the system to reduce their tax bills to a trickle.

Some people just don’t know when it’s time to do the right thing.

Look at the three water companies that are paying practically no tax on their huge profits, while yanking up prices every year according to the retail price index and enjoying a monopoly in their areas – according to today’s report in The Observer.

Thames Water avoids tax by offsetting the interest payments on its debts against its tax liability and delaying it by claiming allowances on capital project spending. The company is seeking government support for a £4.1bn project to build a new “super sewer” under the Thames.

Anglian lent £1,609.1m to a subsidiary company in the Cayman Islands tax haven in 2002. This year it was able to pay £478.1m in equity dividends to investors, including its subsidiary in the tax haven.

Yorkshire Water also increased the debt on its books recently, which offsets tax payments.

In other words, all three were able to exploit a new tax loophole, created by George Osborne last year – that’s right, the Chancellor who is supposedly trying to stop tax avoidance has actually been creating more ways for big business to achieve it – to pay as little tax as possible.

In my article last Monday, I highlighted changes to the tax laws, brought in by Gideon, I mean Mr 0, that mean companies in the UK pay nothing at all on money made by their foreign branches and may claim the expense of funding those foreign branches against tax paid in the UK. That is exactly what Anglian and Yorkshire are doing, according to the Observer report.

Without knowing where the Thames debt is based, it’s hard to say for certain whether it falls into this category of tax avoidance.

Thames made an operating profit of £650 million last year, and Anglia’s was £492, while Yorkshire’s was £303 million. With Corporation Tax at 26 per cent (they should all pay the higher rate), this means the Treasury failed to collect nearly £376 million from the three companies.

The amount lost to the Treasury from these three companies alone would pay off three-quarters of what the government hopes to take away from people currently on council tax benefit, when local authorities implement their new council tax relief schemes – the ‘Pickles Poll Tax’ – in accordance with Eric Pickles’ Localism Act, next April.

Both Thames and Anglian told The Observer their tax was merely being deferred, and they would have to pay it in full at a later date. Yorkshire declined to comment.

My problem with this is that the UK is in deficit difficulties NOW. We need everybody’s tax money NOW. Not later. By exploiting a loophole in the tax system that the Chancellor irresponsibly created, they – AND HE – are extending the problem.

The absence of any significant tax bills means Thames and Anglian were able to pay out dividends totalling £1.5881 billion. I don’t have the figures for Yorkshire. Ask yourself how many of those shareholders have tax avoidance schemes of their own.

Meanwhile, those of us on PAYE have to pay the full amounts of our tax bills – and our utility bills – no matter what harm they do to our household finances. There can be no deferrals for the working-class citizen!

And what help do our bloated water companies give us?

A drop in the ocean.