Friday, 5 August 2011
Economics of Taxation
There are in essence only two ways of taxing citizens:
1. A Tax on Stock (Wealth)
2. A Tax on Flows (Income or consumption)
Within these two tax methodologies are hidden the minutiae of the tax regime system, but at a fundamental level, any tax raising authority has to look at these two options / methodologies available to them.
Now step back second and consider the tax take flows from these two options:
With Incomes and consumption generally on the wane, where else can the taxing authority turn for sustaining or growing there net tax take? Only on the stock of capital assets held by its citizens, so expect a sustained, possibly nuanced, yet blatant attack on your net wealth over the coming few years.
Another salvo was launched again from the Business Secretary, Vince Cable, yesterday and we expect a sustained rhetoric and action in the next budget cycle. Today, the main stream press are reporting rumour of lower the 50% rate to 45%, to encourage an inflow of entrepreneurial and highly skilled management talent, reversing the recent drain or threat of ‘brain drain’ from taxpayers in this tax rate band.