From the TUC

Are the TPA marking the Government too harshly on taxing the super rich?

10 Aug 2010, by in Economics

So the Government has scored 47% in its interim performance test, based on its first three months in office. Who needs Alan Budd and the Office for Budget Responsibility when you have the kind of independent rigorous analysis kindly provided free of charge by the Taxpayers’ Alliance.

As an ordinary taxpayer I should probably take their analysis more seriously, though I shudder to think that anyone in the Government does.

The stand out finding in this analysis is the Government’s woeful performance – 0 out of 5 – for its lack of progress in scrapping the 50p tax rate. Is a tax rate applicable only to those earning over £150,000 – the top two per cent of earners – really an issue for ordinary taxpayers? I can’t imagine I’ll ever earn anything like that figure, though of course if I did the first I’d hear about it would probably be from a Taxpayers alliance press release.

To be fair to the Government, I think they deserve more than 0 out of 5 on this performance target. In these tough economic times, with subsidised childcare schemes, free school meals, school rebuilding programmes and job guarantees for young people out of work all being cut, the Government has still found time to launch a consultation on pension annuities that would only benefit the super-rich. That’s surely worth a point.

My favourite finding however is the section on transparency. The TPA is of course right to call for more transparency in the Government’s decision making. I’d be particularly interested to see the Treasury conduct and publish a distributional impact analysis on its spending decisions – a Fairness Test if you like. I’m sure ordinary taxpayers would also to find out more about how their money is being spent on Private Finance Initiatives, though I doubt the TPA would support this call, given where their funding comes from.

But can there be a better example of the pot calling the kettle black than a secretly funded think-tank such as the Taxpayers Alliance campaigning for transparency?

7 Responses to Are the TPA marking the Government too harshly on taxing the super rich?

  1. Daniel Harris
    Aug 10th 2010, 6:18 pm

    Nice one, Rob. Good piece. Who can argue with transparency?

  2. Tweets that mention Are the TPA marking the Government too harshly on taxing the super rich? | ToUChstone blog: A public policy blog from the TUC — Topsy.com
    Aug 10th 2010, 6:44 pm

    […] This post was mentioned on Twitter by John, ToUChstone blog, Helen W, Glue Web, One Society campaign and others. One Society campaign said: Fairness Test gets a mention within @touchstoneblog article on Tax Payers Alliance report card of govt performance http://bit.ly/bKhX2x […]

  3. The Squeeze
    Aug 10th 2010, 8:23 pm

    How does removing the requirement to buy an annuity at 75 only benefit the super rich?

    You don’t have to be ‘super rich’ to save in a pension.

  4. Calvin Allen
    Aug 10th 2010, 9:55 pm

    Check the notice under the ‘super-rich’ hyperlink!

    I think the idea is that most ordinary people saving for a pension will have had to cash in their pots long before they reach 75: only the super-rich have enough income from other sources not to have to do so…

  5. The Squeeze
    Aug 10th 2010, 11:25 pm

    I think you miss the point of this Calvin. Say someone has £100k life savings in a SIPP they have been taking drawdowns on and is 75.

    If they buy an annuity their family can’t inherit the capital. If they don’t have to buy one they can buy other income yielding assets (shares, bonds) and keep the capital for their family (rather than be forced to give it to the government and insurance companies).

    Blue chip shares and corporate bonds are yielding better than annulities at the moment as the current policy of pinning interest rates to the floor means savers bail out the indebted.

  6. Calvin Allen
    Aug 10th 2010, 11:53 pm

    Liking the idea of ‘annulities’!

    I do understand the principle at stake: the notion of keeping capital in the family is, however, what makes the move to abolish the requirement open to the criticism that its proponents are simply seeking ways of smoothing IHT planning.

    You’re right that there are other ways of securing an income in retirement – although there are risks with these which do not always make them suitable for people with lesser funds, or with less knowledge of the options and their potential drawbacks.

    The biggest objection though is that we give expensive tax reliefs to people on the grounds that the practical use of pensions in retirement lessens the burden on the state: it’s not a sensible use of public money to facilitate their survival beyond the life of the person receiving the relief, as a part of their estate.

  7. The Squeeze
    Aug 11th 2010, 1:23 am

    But you pay income tax at the normal rate on the dividend or coupons from the bonds too. IHT is payable by the recipent at the normal rate, and then they pay tax on any income they derive from the assets (or VAT on anything they buy with it in the UK).

    It doesn’t become ‘public money’ until it is taxed. Your life savings are YOUR money. Whether or not there should be tax relief on pensions conributions
    is another question.

    Yes, there are risks with buying shares or bonds. There are also risks with buying annuities, currency risk, inflation risk and regulatory risk. If you are lucky enough to have assets you have to accept that there is a degree of risk attached.

    Investing your own pension might not be suitable for everyone, but ‘super rich’ does not equate with ‘financially literate’. Just because the critical mass of workers chose to read the Sun and Nuts magazine doesn’t mean we should all be dumbed down to their level for the sake of ‘equality’.

    The workers deserve a choice when it comes to their fruits of their lifes labour!