Writing in today's City AM, Chas Roy-Chowdhury, Head of Tax at the Association of Chartered Certified Accountants, has this to say about the recent tax increases:
THE INDIVIDUAL - From the individual taxpayer’s perspective, it has been a busy year. VAT and national insurance contributions are up, while more people have been brought into higher tax bands to pay for a rise in the personal allowance for the worst off...
BUSINESS - Business, by comparison, has fared better. National insurance went up for employees but not for employers...
Nope.
As HM Revenue & Customs' website clearly states, the main rate of Employee's NIC went up from 11% to 12%, and the main rate of Employer's NIC went up from 12.8% to 13.8% from 6 April 2011.
I could forgive this if it had been written by your average newspaper hack, who vaguely remembers the Tories attacking Labour's proposed 1% increase in Employer's NIC as a "tax on jobs" and foolishly assumed that the Tories simply hadn't implemented it, but this man is Head Of Tax at the largest (although not most prestigious) accountancy body in the UK.
As a secondary issue, if you look at economic incidence rather than legal incidence of a tax, you will know full well that Employer's NIC is largely borne by the employee in lower wages; and VAT is largely borne by the business (shared between employer and employees in whatever ratio) and not the consumer (the clue is in the name; VAT is a tax on "Value added", i.e. gross profits), so he's got the whole thing on its head anyway, apart from being factually wrong.
Stormlight
2 hours ago
6 comments:
Good one. Which is why NIC and income tax should be combined ASAP. But they mightn't do it, because that would mean ordinary people getting 40% tax relief on their pension contributions.
S, I'm a simplification campaigner, let's merge income tax, NI, VAT and corporation tax into a single flat rate. The rate would be about 45%, but at least that would be a) honest and b) less economically damaging that having all these different overlapping taxes on the same underlying activity, so that some pay much less and others much more than 45%.
As HM Revenue & Customs' website clearly states, the main rate of Employee's NIC went up from 11% to 12%, and the main rate of Employer's NIC went up from 12.8% to 13.8% from 6 April 2011.
B----y hell, I didn't realize it was that much in the first place.
JH, yes it is that high (crept up from 10% about ten years ago).
If you look at all the different effective marginal rates, you come out with un unweighted average of over fifty per cent.
"you will know full well that Employer's NIC is largely borne by the employee in lower wages"
Is this true? I thought it was the other way round. Employees NICs were borne by the landlords, execs and shareholders as the business pays higher gross wages. What evidence is there on this issue?
AW, as between employer and employee, it is largely borne by employee. Higher NI does not in fact lead to significantly higher unemployment, it just leads to lower wages.
So Employer's NIC -> lower wages -> lower rents etc.
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