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Re: [Fsfe-uk] Cheats!

From: Ian Lynch
Subject: Re: [Fsfe-uk] Cheats!
Date: Sun, 05 Feb 2006 13:22:29 +0000

On Sun, 2006-02-05 at 12:47 +0000, Simon Waters wrote:
> Ian Lynch wrote:
> > On Sat, 2006-02-04 at 10:46 +0000, Simon Waters wrote:
> > 
> > The reason they aren't combined is because people would see a true
> > basic rate of income tax over 30%.
> The effect on overall income tax rate is surprisingly blunted by the
> National Insurance ceiling (£630/week, when employee contributions drop
> to 1%, Browns secret tax rise), and that Income tax is paid on all
> (taxable) earnings not just wages. As a result you can replace what is
> effectively a headline NI rate of 22% with a very modest rise in the
> headline income tax rate, the headline rate may not even be over 30%.

It will still be presented as a tax rise in the press.

> > There is a political reason too. No politician wants to be associated
> >  with Headlines saying income tax rises to 35% or whatever.
> No that could be spun away, 

Perhaps, but its one additional hassle not to have to bother with and
Gordon Brown seems to enjoy complexity anyway ;-)

> it is the winners and losers that make it
> politically impossible.

> Winners - people on low to median salaries, companies
> Losers  - people who own companies, people living off capital (rich, and
> some retired folk), accountancy firms.

Yes, I own a company and we pay a substantial amount in dividends to
legally reduce the NI overhead. It makes sufficient difference to at one
time be the difference between staying in business and several people
losing their jobs. Small businesses like ours would probably lose a lot
more than large corporates because in general the staff in corporates
are all on standard PAYE so they pay the full rates of NI, both employee
and employer parts. More than 50% of people are employed in small
businesses and many (most) struggle to make ends meet they are not all
mega rich people screwing the system. In many ways I could be
financially better off and more secure with an inflation proof pension
if I had not ditched my "career" for runing a business. But its my
choice and I prefer to have more control my own destiny even if it means
lower financial rewards.

It depends on how the NI was distributed into the tax system as to how
it affected who. I'm generally in favour of getting rid of NI as it is
redundant but the devil is in the detail of how that might be done. They
could for example raise VAT on say luxury goods, do away with personal
allowances, raise the highest rates of income tax etc Some of these
might benefit the least well off some might make it worse for them.

> Brown had a go with removing the ceiling on 1% of National Insurance,
> although of course that still doesn't affect the idle rich.

I don't know too many idle rich people but I doubt that hitting the ones
that really are idle rich will make up for all the revenue got from NI.
Most of those people would find ways of avoiding payments if they were
as high as they would need to be. Its happened in the past. The other
benefit of NI to governments is they can raise revenue on NI and claim
they haven't increased taxes - New Labour did exactly that.

> Of course overall a more efficient tax system benefits everyone.

Agreed. The current one is far too complicated. The tax system has to be
fair but also provide incentives to get people to generate wealth. The
politics is in where the balance lies.

> > Well the present government seems to have decided to get rid of a big
> >  section of the Civil Service so I don't see that this is really a
> > tablet of stone.
> Have they succeeded?

Not yet, it remains to be seen whether they will but it is early days
and it is a stated policy. I don't expect to see any quick fixes because
the establishment is pretty firmly entrenched.

> Total Civil Service numbers did decrease last year, by 3000 (I've yet to
> see where the savings were made), or about half of one percent, although
> it should be noted this is after a rather large growth in the last 5
> years. Some of the departments came back saying they can't lose anymore
> <they must have a good sense of humour at Whitehall>.
> Don't get me wrong I think most civil servants do a good job, but I
> doubt the ability (or perhaps will) of the government to make dramatic
> cuts in the Civil Service, inspite of having made dramatic increases in
> the past.
> > So get a MAC vendor to complain to the OFT that they are being
> > excluded from the market.
> Hmm

One of the features of the law is that two undertakings can not work
together to fix or reduce prices that might bloack a competitior to one
of them. If you said that the NHS was an undertaking because it had some
trading aspects and it was working with MS with the effect of blocking
Apple products it would be illegal.

> >> I think Ian is probably on the mark, the contract should have been 
> >> pushed to open tender, and in answer to who can afford to dispute
> >> it - I'd suggest IBM, SUN or Novell as likely candidates.
> > 
> > 
> > When I pushed this point I got stone-walled to a certain extent -
> > no-one was going to cause a big stir - but I noticed that the next
> > time, Sun was involved and did sell the NHS some Star Office
> > licenses.
> Sounds like the idea stuck.

That's the thing. We can make a difference by lobbying to the right
people in the right way and don't get disheartened if it doesn't seem to
work straight away. This is a war of attrition :-)

Ian Lynch <address@hidden>

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