Tuesday 13 March 2012

"Income tax plan is foiled by Osborne: Treasury 'deletes' earnings data"

From The Daily Mail:

Schemes for an ‘income tax’ have been torpedoed by George Osborne after he effectively deleted a database compiled by HM Revenue & Customs spies containing details of millions of people's earnings. The move means that any levy on incomes would now take years to introduce...

Officials say it would take three years to conduct a new nationwide survey of wages and salaries. Inspectors at HM Revenue & Customs had logged details of the wages paid to 25 million employees England and Wales. Other information included whether an employee received benefits in kind such as a company car. The data, which would be crucial for deciding who should pay how much income tax, had been entered into a complex database – but Mr Osborne ruled out using it until at least 2015.

Income tax assessments in Wales in 2005 saw four times as many people being taxed on higher incomes than previous assessments in 1991, and Labour postponed plans for new income tax assessments in England that same year amid mounting anger over the potential for big tax rises hitting middle-class families whose earnings had gone up over the previous fourteen years.

Tory MP Peter Bone praised Mr Osborne's decision.

"This income tax would cost goodness know how many millions to get up and running," he said. "People would suddenly be reminded that they were earning a lot more than they did twenty-one years ago, very often having worked for the same employer for years and years or perhaps living off investment income from inherited wealth.

"We know the Liberals don’t like anyone that has been successful but this really would be an unfair tax. It’s good that the Government has got rid of the information that could have been used to calculate it – why should the State be keeping databases like this?"

9 comments:

Lola said...

...and then I woke up...

Graeme said...

lol - deduction at source is the best way to collect taxes. No wage slave really knows how much he/she has paid over the years. Nor do we know how much the pension industry has ripped us off.

Bayard said...

Even for the Torygraph, this article sets new standards for mendaciousness. As a commenter quickly pointed out, there was no "database" to "delete". All the information is contained in the local authorities' council tax valuation records. Then there's the lie about it taking three years to value all the properties. Well it can't take as long as it did last time, which was a lot less than that, and how long did it take to do the revaluation in Wales? Finally, there's the implied lie that band changes in the Welsh revaluation led to increased council tax bills as a result of that change. And then there are the comments, which make me think that there really are advantages in living in an elective dictatorship compared to living in a democracy.

Mark Wadsworth said...

L, but why is this article a fantasy? What is it that makes everybody think it's normal to tax incomes not land values?

G, yes, politicians and voters alike just love those stealth taxes.

B, the 1991 council tax valuations took a couple of months, Wales was done pretty quickly as was Northern Ireland in the same year (and they don't have bands - their Domestic Rates is 0.7% of the selling price at 1/1/2005 and no back chat). Valuing land is the easiest thing in the world.

The Welsh myth is particularly sickening, but to explain why it wouldn't change anybody's tax bill* if every single home was shifted up one band requires that people understand maths and logic, and they don't, they just understand slogans, however vacuous.

* Plus/minus £30, I checked.

Bayard said...

"What is it that makes everybody think it's normal to tax incomes not land values?"

This could be an account of the politics surrounding the introduction of income tax 200 years ago, except that the scheme was not "foiled". The names may have been different, but the reactions were the same.

Physiocrat said...

The incidence of income tax is on the employer who then has to build it into prices and pass it on to customers, or absorb it and pass it backwards onto the landlord. Ultimately all taxes come out of land rental value.

Mark Wadsworth said...

B, the ruling class at the time were quite happy for income tax to come in, because by and large "somebody else" was paying it.

P, yes, but if/when we advance that argument the Homey counter-argument is "Well what are you complaining about then?"

The answer is "The complexity and the dead weight losses" but they then claim that VAT is simple and they don't believe in dead weight losses when it suits them.

Bayard said...

"B, the ruling class at the time were quite happy for income tax to come in, because by and large "somebody else" was paying it."

Yes, probably, or they wouldn't have done it, but it was still a revolutionary idea. To quote Wikipedia: "A uniform Land tax was introduced in England during the late 17th century. This formed the main source of government revenue throughout the rest of the 17th century, the 18th century and the early 19th century."

Mark Wadsworth said...

B, ta, link to Wiki article here. That just consolidated "Rates" (Business, Domestic and Agricultural) which were introduced in the late 15th century.