New Dail / New Taoiseach

Chips Lovell

Simply dismissing something as nonsense doesn't make it so. It isn't a case that one tax is more reliable than another, rather that more taxes are more reliable than fewer ones.

Sam Russell

efanton wrote: »

This broadening the tax base nonsense is just that nonsense.

People are advocating property taxes via LPT, stamp duty etc, and yet we when have property bubbles and crashes its these very taxes that cause government estimates and revenues to vary widely.

The logic behind broadening the tax base is so that government estimates and revenues are predictable and reliable. Any tax related to property would be the LEAST reliable form of tax. That's one of the reasons I would advocate scrapping LPT or whatever similar tax is used to fund local services and amenities.

Can anyone explain to me how LPT could possibly be a more reliable tax than income tax or VAT?

The difference between LPT and stamp duty are quite stark. Stamp duty on property transfers is a transaction tax, while LPT is due every year. In a property slump, the stamp duty dries up while LPT continues. Even income tax declines in a slump when unemployment rises, but LPT continues as the property remains liable. VAT would also decline as the economy shrinks.

Princess Consuela Bananahammock

Sam Russell wrote: »

Well, there we differ.

If you are a tenant paying exorbitant rent to a rapacious landlord, would you not consider it fair that the landlord pays LPT on the property, as well as income tax on the profits from the rent?

The more spread the tax base is, the less likelihood that changes in the economy will result in huge shock to that economy.

Why are specifying "rapacious" landlords? Are non-rapacious landlords liable for different treatment for some reason? At what point does a landlord move from one category to the other?

Anyway, in asnwer to your question, no - just tax on profits. Why should they pay on the value of a posession? (Bear in mind: I'm assuming it's an owner-occupier situation: if they person owns two or more hosues, then yes - I'd agree with you; and have stated as such)

And bear in mind, what someone else is paying is irrelevant.

johnnyskeleton

efanton wrote: »

They will not be exempt from paying taxation, they will be paying income tax proportional to what they can afford.

In your scenario, they can have a massive asset and pay minimal or no tax because of their low income.

so you would consider a pensioner living only the state pension whose only asset is their home wealthy?

I would consider them wealthier than a state pensioner without a home, or someonr eith a state pension amd a small private pension who has to rent, yes.

Generally workers in the cities earn more. If property tax was transferred to general taxation they would still be paying slightly more.

Again, this weird euphamism of general taxation. As opposed, presumably, to specific taxation.

But its not solely income tax is it? Its income tax, vat, and any other taxes that everyone pays. There would be no additional revenue collected. The sum previously collected in property taxes would be compensated for by a small adjustment in income tax to or other form of general taxation in order to collect a similar amount.

Again, if general taxation is several types of tax, why does it exclude property tax?

I was not talking about pension allowances.
I was talking about tax breaks that are available to only non PAYE earners.
Its relatively simple for someone who is self employed to pay far less tax than someone with the same income paying PAYE.

I asked for some specific examples of these tax breaks, so perhaps you might explain them to me?

Now you are talking nonsense. People are not going to stop working simply because they do not own a home. In many countries where renting is predominant very successful people have never owned a home. Do those countries have revenue problems?

Well if i said that people would stop working because they do not own a home, then yes, it would be an unreasonable point I made. However I didnt make that point. So Im not sure what youre trying to say here. If you increase income tax you discourage productive labour. We may not be at the point at which any more tax increases will stop people working, but it does ultimately reach that point. So the idea that we can constantly increase income tax without it having an effect on the overall economy doesnt stand up

Water John

Once income tax goes too high, workers look for avoidance. They look for a bit in cash. Staff even in the political parties were getting, under the counter cash, in the 1980s.

efanton

johnnyskeleton and Water John you are missing my point completely.

Most people will not be paying MORE tax, they will be paying the same or a similar amount of tax, but LPT would not be one of them.

How does a PAYE worker avoid taxation? they don't. Generally its only the self employed than can avail of tax avoidance schemes.

The majority of workers who own homes are currently paying somewhere in the region of €10 to €15 a week.
If you transfer LPT to income tax many more people would be contributing, and therefore that weekly cost would significantly be reduced as more people pay income tax than LPT. The aim would be to collect a similar amount not use it as a excuse to gouge tax payers yet more.

Are you truly suggesting people will be less inclined to work or avoid being productive in their jobs because they are now paying less than €10 a week extra in income tax while at the same time being no longer liable to LPT
For many (single home owners) they will be paying a slightly less. Maybe according to your theory these worker will now become hyper-productive, but they certainly will not become any less productive.

For those that do not own homes, they are probably renting. rents are set to cover such costs as LPT. So although they will appear to be paying more tax as long as landlords are not let pull a swift one and the government put some mechanism in place to prevent that, there would be very little difference in their personal spending budget at the end of the month.

An adjustment of .25% or less to the lower band of income tax should more than cover the cost of lost revenue due to LPT being scrapped. In fact that would probably be enough to cover the current shortfall in county council spending budgets as well.

Water John

Anyone who has studied macroeconomics disagrees with you and I won't take this discussion any further.

charlie14

Water John wrote: »

Once income tax goes too high, workers look for avoidance. They look for a bit in cash. Staff even in the political parties were getting, under the counter cash, in the 1980s.

Standard rate of VAT was increased to 35% in the early 80`s a well.
The black economy became so rife that the law of diminishing returns resulted in it being reduced to 23%

efanton

Water John wrote: »

Anyone who has studied macroeconomics disagrees with you and I won't take this discussion any further.

And that is why people have little trust in the governments we had in the last 20 years.

Its a simple point, but being told that 'you are not clever enough or educated enough' to understand doesn't wash anymor


So I will assume that in the absence of a rational answer, there is no reason not to get rid of LPT, the only reason being dogma or political philosophy.

efanton

charlie14 wrote: »

Standard rate of VAT was increased to 35% in the early 80`s a well.
The black economy became so rife that the law of diminishing returns resulted in it being reduced to 23%

I would agree 35% is way to high for the lower band.

However to get rid of LPT and compensate for the resulting loss in revenue we are talking about a increase in rate of less that 0.25%

charlie14

efanton wrote: »

I would agree 35% is way to high for the lower band.

However to get rid of LPT and compensate for the resulting loss in revenue we are talking about a increase in rate of less that 0.25%

What I do not get is that a lot of people who are in favour of scraping LPT for it being inequitable, are also in favour of scraping the USC which is probably the most equitable tax we have.

efanton

charlie14 wrote: »

What I do not get is that a lot of people who are in favour of scraping LPT for it being inequitable, are also in favour of scraping the USC which is probably the most equitable tax we have.

I dont think people are against USC because it is inequitable, it more because of the broken promises associated with that tax. It was an emergency measure that was to be removed once the austerity crisis had abated.

After all it was a tax measure allegedly designed to get the country out of the mess that was austerity. Yet we have FG now claiming that the austerity period is gone, although many from personal experience would argue differently. If austerity is gone why hasn't this tax been dropped, or an equivalent adjustment made to income taxes so that the USC can remain. But it seems the government wants its bread buttered on both sides in neither scrapping the USC or making adjustments to income tax rates removing that extra burden imposed as a 'emergency' measure during austerity.

If the austerity measures are still required then obviously FG are lying, we have yet to escape austerity.

As always you reap what you sow. If you deceive people they are unlikely to trust you or believe whatever excuse you give, even if that excuse is perfectly valid, to go back on your word.

The truth is governments are like kids with sweet money. Give a child a couple of euro to go buy sweets and they are perfectly content. Give a child €5 to go buy sweets and most will spend the lot even though they couldn't possibly eat that many sweets at once.

But the question remains where has the austerity money been spent? It would be a safe assumption to assume that most if not all of it has gone towards servicing the horrendous debts this country has now built up. If that is true, and knowing that we would be servicing those debts for decades, why did the government lie about it being an 'emergency' and temporary tax?

PommieBast

efanton wrote: »

But the question remains where has the austerity money been spent? It would be a safe assumption to assume that most if not all of it has gone towards servicing the horrendous debts this country has now built up.

Most or all of it would have gone to plug the horrendous deficit...

rn

Main reason I don't like USC is because it makes tax more difficult to calculate because we've three effective taxes in income between PRSI, PAYE and USC.

I scrap all three and introduce a three tier PAYE across the board. 15% on everything up to 40k. 40% on income 40-70k. And 48% on all income 70k. I would put in credits to help people in low pay exceptional family situations, but ultimately everyone pays some tax. Richer paying more tax.

On house tax, I agree with something in principle. I think site valuation is fairer.

There should be water charges as its a consumable commodity that generally richer people consume more of, so they are getting off scot free under present system.

efanton

PommieBast wrote: »

Most or all of it would have gone to plug the horrendous deficit...

I would have assumed DEBT in this case was the correct term.

the way I understand it and as has been explained to me is
A deficit is created when a government spends more than it receives in tax revenues. It then issues government bonds to cover that deficit. In effect it underwrites its own debt. A deficit is a yearly thing, if not corrected by the following year it the becomes debt.

If the government borrows from another country, state or a financial institution (the ECB, IMF or EU for example) then I thought it would be correctly considered as debt.

Have I misunderstood those terms?

Its strange that the Irish Times always refers to the money owed for bailout as debt.

Peregrinus

efanton wrote: »

I would have assumed DEBT in this case was the correct term.

A deficit is created when a government spends more than it receives in tax revenues. It then issues government bonds to cover that deficit. In effect it underwrites its own debt.

If the government borrows from another country, state or a financial institution (the ECB, IMF or EU for example) then I thought it would be correctly considered as debt.

Have I misunderstood those terms?

I think you have. A state issues bond by selling them to people. Those people could be other public or private financial institutions, corporate investors, or individuals. In every case the bond represents a debt owed by the state to the entity/institution/individual to whom the bond has been sold (or to other entities/institutions/individuals to whom the bond is onsold, gifted, transferred or whatever).

Basically, governments fund deficits by borrowing. The bond is a particular form of borrowing. All borrowing creates debt, bonds included.

efanton

Peregrinus wrote: »

I think you have. A state issues bond by selling them to people. Those people could be other public or private financial institutions, corporate investors, or individuals. In every case the bond represents a debt owed by the state to the entity/institution/individual to whom the bond has been sold (or to other entities/institutions/individuals to whom the bond is onsold, gifted, transferred or whatever).

Basically, governments fund deficits by borrowing. The bond is a particular form of borrowing. All borrowing creates debt, bonds included.

So the deficit is the difference between what revenue is collected and what is spent.

But it becomes debt when the government borrows to cover that deficit?

Isnt that what I said?

Peregrinus

efanton wrote: »

So the deficit is the difference between what revenue is collected and what is spent.

But it becomes debt when the government borrows to cover that deficit?

Isnt that what I said?

Ah. Possibly I misunderstood when you said:

"If the government borrows from another country, state or a financial institution (the ECB, IMF or EU for example) then I thought it would be correctly considered as debt".

If the government borrows from anyone at all, that's debt.

The other point to clear up is that the borrowing isn't something that happens after the government has spent more than it gets in in tax revenue. They can't spend money they don't have, so they borrow the money and then spend it. I think you are mistaken to suggest that the government has a year after spending the money to raise it through borrowing; until they raise it through borrowing, they don't have it to spend.

But issuing a bond is only one method of borrowing. The government could, e.g., run an overdraft to finance spending today, and then next week or next month issue a bond, and use the issue proceeds to clear the overdraft. In that example, though, the debt arises as soon as the overdraft is created; an overdraft is borrowing, and borrowing is debt. The subsequent issue of the bond doesn't create new or extra debt; it just swaps one kind of debt for another.

efanton

Peregrinus wrote: »

Ah. Possibly I misunderstood when you said:

"If the government borrows from another country, state or a financial institution (the ECB, IMF or EU for example) then I thought it would be correctly considered as debt".

If the government borrows from anyone at all, that's debt.

The other point to clear up is that the borrowing isn't something that happens after the government has spent more than it gets in in tax revenue. They can't spend money they don't have, so they borrow the money and then spend it. I think you are mistaken to suggest that the government has a year after spending the money to raise it through borrowing; until they raise it through borrowing, they don't have it to spend.

But issuing a bond is only one method of borrowing. The government could, e.g., run an overdraft to finance spending today, and then next week or next month issue a bond, and use the issue proceeds to clear the overdraft. In that example, though, the debt arises as soon as the overdraft is created; an overdraft is borrowing, and borrowing is debt. The subsequent issue of the bond doesn't create debt; it just swaps one kind of debt for another.

Thanks, That's has cleared it up. Much appreciated.

I am aware that governments cant spend whats not there, they have to borrow through the fiscal year to do so. Probably my bad grammar or explanation.


I was initially responding to Pommiebast who said

Pommiebast
Most or all of it would have gone to plug the horrendous deficit...

Correcting my earlier statement

It would be a safe assumption to assume that most if not all of it [USC] has gone towards servicing the horrendous debts this country has now built up.

So its safe to say it is DEBT not a DEFICIT

Peregrinus

efanton wrote: »

Thanks, That's has cleared it up. Much appreciated.

I am aware that governments cant spend whats not there, they have to borrow through the fiscal year to do so. Probably my bad grammar or explanation.


I was initially responding to Pommiebast who said



Correcting my earlier statement



So its safe to say it is DEBT not a DEFICIT

No, since you can borrow money for purposes other than to cover a deficit on current spending. But a deficit is always a debt.

efanton

Now I am totally confused.

Ireland now owes billions, but we are not repaying a debt, but instead a deficit, but a deficit is always a debt

PommieBast

efanton wrote: »

Now I am totally confused.

Ireland now owes billions, but we are not repaying a debt, but instead a deficit, but a deficit is always a debt

USC was introduced to take the place of other taxes for which receipts had collapsed.

Peregrinus

efanton wrote: »

Now I am totally confused.

Ireland now owes billions, but we are not repaying a debt, but instead a deficit, but a deficit is always a debt

The debt is the total amount that the state owes to lenders, both Irish and foreign.

The deficit is the amount by which, in any year, government spending exceeds tax receipts. It will have to be financed by raising new debt.

You can lower or eliminate the deficit in any year by increasing taxes for that year. if you increase taxes so much that tax receipts now fully cover the current year's expenditure, there will be a nil deficit - possibly even a surplus (where tax receipts exceed expenditure).

Sam Russell

efanton wrote: »

I dont think people are against USC because it is inequitable, it more because of the broken promises associated with that tax. It was an emergency measure that was to be removed once the austerity crisis had abated.

Income tax was a temporary tax to pay for the Napoleonic war. It is still with us, only much increased.

New tax headings are always temporary.

USC is a 'good' tax in that it is hard to avoid, and has no relief that would give rise to loop holes.

johnnyskeleton

efanton wrote: »

johnnyskeleton and Water John you are missing my point completely.

Most people will not be paying MORE tax, they will be paying the same or a similar amount of tax, but LPT would not be one of them.

Yes I understand that the same amount of tax will be collected overall. But you are saying that the person who owns a 500k house and earns 30k a yewr should pay the same tax as someone who rents and earns 30k a year. I think thats unfair on the renter as they are objectively less wealthy.

How does a PAYE worker avoid taxation? they don't. Generally its only the self employed than can avail of tax avoidance schemes.

This is the third time youve asserted that some people can avoid tax, but have been very vague on the details. It shifted from tax breaks to tax schemes to only the self employed. But even still, what tax schemes do self employed people get that PAYE employees dont get?

Meanwhile, in the real world, self employed tac credits are only now being brought up to the same level as PAYE employees; lower paid employees are exempted from prsi (less than 352 per week) when self employed people are not and higher paid self employed people pay 3% extra usc over 100k. So self employed people are liable to more taxes generally, and thats before we get into the unequal welfare options, private pensions, admin and accountancy fees, no sick leave etc etc.

Are you truly suggesting people will be less inclined to work or avoid being productive in their jobs because they are now paying less than €10 a week extra in income tax while at the same time being no longer liable to LPT
For many (single home owners) they will be paying a slightly less. Maybe according to your theory these worker will now become hyper-productive, but they certainly will not become any less productive.

When the government introduced a pension levy on stste employees, they started to work to rule. Many people decide to work less hours when they get up into the higher tax bands. Many high inckme earners already are not tax resident in Ireland because our taxes are so high, and this is also a problem with attracting multinationals to relocate staff here.

It is undeniable that increasing tax on an activity discourages that activity. It is however a lot trickier when you have to measure it. Of all the things to discourage, proeuctive labour is the easiest to tax, but is bad for the economy at large to discourage.

For those that do not own homes, they are probably renting. rents are set to cover such costs as LPT. So although they will appear to be paying more tax as long as landlords are not let pull a swift one and the government put some mechanism in place to prevent that, there would be very little difference in their personal spending budget at the end of the month.[/quore]

Rents are set based on supply and demand. The idea that removing property taxes is a move that benefits renters is an extremely illogical leap.

efanton

johnnyskeleton wrote: »

Yes I understand that the same amount of tax will be collected overall. But you are saying that the person who owns a 500k house and earns 30k a yewr should pay the same tax as someone who rents and earns 30k a year. I think thats unfair on the renter as they are objectively less wealthy.

does the pensioner who owns the home have more money to spend?
Does the disabled person have more money to spend?
Does the widowed wife with kids have more money to spend?
That list can go on and on. Not everyone is as fortunate as ourselves.
Yes they have an asset, but its a non productive asset that earns them no additional income.
Do you think for one minute that those who rent are not paying property taxes. I can guarantee you every landlord in the country has factored in the full cost of that tax in the rents they charge.
By transferring property taxes to income taxes both the home owner and the renter would be paying similar amounts, as they do already. What is unfair about that?

This is the third time youve asserted that some people can avoid tax, but have been very vague on the details. It shifted from tax breaks to tax schemes to only the self employed. But even still, what tax schemes do self employed people get that PAYE employees dont get?

Now you are being very naive. There are many ways to avoid tax if you own your own company. Here's a simply example for you.
A self employed person owns a relatively success business,What is the first thing they will do to reduce the taxation they pay?
They will award themselves a very modest income for which they will pay similar taxes to a reasonably well paid PAYE worker. At the end of the year their company makes profit, significantly more profit because they only awarded themselves a modest wage. They pay a dividend on those profits to the share holders, probably himself and his wife or a partner in the business. Those dividend are taxed at 20%, had they taken a better wage they would have paid 40%. He has reduce the tax on a sizeable chunk of his earnings by 20%. Can a PAYE worker do that?

Meanwhile, in the real world, self employed tac credits are only now being brought up to the same level as PAYE employees; lower paid employees are exempted from prsi (less than 352 per week) when self employed people are not and higher paid self employed people pay 3% extra usc over 100k. So self employed people are liable to more taxes generally, and thats before we get into the unequal welfare options, private pensions, admin and accountancy fees, no sick leave etc etc.

I totally agree, it was lunacy to expect the self employed not to have the same tax credits. Worse still is the fact that if they become sick or are unable to work they dont qualify for income support.
No self employed person earns a wage over 100k, if they do then they are just plain stupid and their accountant would tell them that. They will use the dividends dodge which is a perfectly legal tax avoidance measure.

When the government introduced a pension levy on stste employees, they started to work to rule. Many people decide to work less hours when they get up into the higher tax bands. Many high inckme earners already are not tax resident in Ireland because our taxes are so high, and this is also a problem with attracting multinationals to relocate staff here.

Wrong on two points.
Wealthy people do not become non resident to avoid income tax. They become non resident to avoid other taxes.

Workers of Multinational that relocate staff to Ireland can avail of SARP for a period of up to 5 years.
They pay a rate of 30% on all income between €75k and €500k, normal income tax rates apply for the remainder. Significantly lower than the normal rate and probably lower than the rate they were previously paying in the country they came from.

It is undeniable that increasing tax on an activity discourages that activity. It is however a lot trickier when you have to measure it. Of all the things to discourage, proeuctive labour is the easiest to tax, but is bad for the economy at large to discourage.

Im sure that means something, but the way you have written it makes no sense.[/quote]

Rents are set based on supply and demand. The idea that removing property taxes is a move that benefits renters is an extremely illogical leap.

Every landlord factors in the cost of property taxes into the rent they charge.
If there is no property tax to pay, then rents should be adjusted accordingly.

charlie14

efanton wrote: »

I dont think people are against USC because it is inequitable, it more because of the broken promises associated with that tax. It was an emergency measure that was to be removed once the austerity crisis had abated.

After all it was a tax measure allegedly designed to get the country out of the mess that was austerity. Yet we have FG now claiming that the austerity period is gone, although many from personal experience would argue differently. If austerity is gone why hasn't this tax been dropped, or an equivalent adjustment made to income taxes so that the USC can remain. But it seems the government wants its bread buttered on both sides in neither scrapping the USC or making adjustments to income tax rates removing that extra burden imposed as a 'emergency' measure during austerity.

If the austerity measures are still required then obviously FG are lying, we have yet to escape austerity.

As always you reap what you sow. If you deceive people they are unlikely to trust you or believe whatever excuse you give, even if that excuse is perfectly valid, to go back on your word.

The truth is governments are like kids with sweet money. Give a child a couple of euro to go buy sweets and they are perfectly content. Give a child €5 to go buy sweets and most will spend the lot even though they couldn't possibly eat that many sweets at once.

But the question remains where has the austerity money been spent? It would be a safe assumption to assume that most if not all of it has gone towards servicing the horrendous debts this country has now built up. If that is true, and knowing that we would be servicing those debts for decades, why did the government lie about it being an 'emergency' and temporary tax?

We have corporation tax that nobody has a clue how to budget for, with the possibility of the other shoe dropping any day. The increasingly likelihood of a hard Brexit, and now the Covid-19 virus. Whether or not austerity is gone is an irrelevance. Just one of the above not going our way we will be quickly back too austerity.


For me this SF idea of scraping one tax to just compensate by lumping it on another is nothing other than semantics. Especially based on a budget that is double the projected fiscal space available.


I can see where there may be an argument for reviewing the LPT, as the imputed benefits of a house are basically the same, whereas the tax can vary greatly, but to scrap the USC, a tax that has little or no loopholes and replace it with an increase in one, income tax, that is rife with loopholes is economic insanity.

efanton

charlie14 wrote: »

We have corporation tax that nobody has a clue how to budget for, with the possibility of the other shoe dropping any day. The increasingly likelihood of a hard Brexit, and now the Covid-19 virus. Whether or not austerity is gone is an irrelevance. Just one of the above not going our way we will be quickly back too austerity.


For me this SF idea of scraping one tax to just compensate by lumping it on another is nothing other than semantics. Especially based on a budget that is double the projected fiscal space available.


I can see where there may be an argument for reviewing the LPT, as the imputed benefits of a house are basically the same, whereas the tax can vary greatly, but to scrap the USC, a tax that has little or no loopholes and replace it with an increase in one, income tax, that is rife with loopholes is economic insanity.

Well FF were promising to scrap LPT the then changed their minds and 'reform' it. in other words let local councillors at it resulting in no increases
FG were more honest about it, but said more or less the same thing that LPT should be set by local councillors but the money would be spent locally
SF have openly admitted to scrapping and replacing the lost revenue through a second home tax and other measures
The reality is if FF or FG form a government that the LPT collected will quickly be insufficient to fund the costs of local services.
It doesnt matter who you pick the LPT is as good as gone, or will be totally insufficient as a tax to fund local services.

I do wonder if the SF proposals for income tax will work as effectively as they suggest.
Any business owner with half a brain will simply award themselves a modest income, and at the end of year pay a dividend on profits to share holders.
They will only pay 20% tax on dividends.
Of course there's a whole load of people that cant avoid the new rate on income tax if the SF proposal was put in place. So it might just raise the revenue they expect.

In principal I am totally for a 3rd tax band. What I do not understand is why SF did not take the opportunity to adjust the existing two bands.
If you had the low band set so that income tax would be paid from say 12k at 10% to an upper threshold of 25k, then have the next band upper threshold set at say 25% up to 50k, then a 40% rate beyond that it would have been a fairer tax, one that helped the least well off, and a system where future government could tweak the system to benefit the low, middle or higher incomes individually.

You would also be widening the tax base as very low income worker who pay nothing at the moment would still be contributing something, but at an affordable level. But the problem there would be an inevitable rise in the minimum wage, which might not be as bad as it sounds if it also meant less reliance on state benefits.

With a two band system you always hurt the middle income earner if you want to take more tax from the higher income earners, and if you increase the upper threshold of the lower band to benefit the lower paid you benefit everyone diluting the intended effect. A three band system make a lot of sense if the threshold are set at reasonable levels

Robert McGrath

efanton wrote: »

Well FF were promising to scrap LPT the then changed their minds and 'reform' it. in other words let local councillors at it resulting in no increases
FG were more honest about it, but said more or less the same thing that LPT should be set by local councillors but the money would be spent locally
SF have openly admitted to scrapping and replacing the lost revenue through a second home tax and other measures
The reality is if FF or FG form a government that the LPT collected will quickly be insufficient to fund the costs of local services.
It doesnt matter who you pick the LPT is as good as gone, or will be totally insufficient as a tax to fund local services.

I do wonder if the SF proposals for income tax will work as effectively as they suggest.
Any business owner with half a brain will simply award themselves a modest income, and at the end of year pay a dividend on profits to share holders.
They will only pay 20% tax on dividends.
Of course there's a whole load of people that cant avoid the new rate on income tax if the SF proposal was put in place. So it might just raise the revenue they expect.

In principal I am totally for a 3rd tax band. What I do not understand is why SF did not take the opportunity to adjust the existing two bands.
If you had the low band set so that income tax would be paid from say 12k at 10% to an upper threshold of 25k, then have the next band upper threshold set at say 25% up to 50k, then a 40% rate beyond that it would have been a fairer tax, one that helped the least well off, and a system where future government could tweak the system to benefit the low, middle or higher incomes individually.

You would also be widening the tax base as very low income worker who pay nothing at the moment would still be contributing something, but at an affordable level. But the problem there would be an inevitable rise in the minimum wage, which might not be as bad as it sounds if it also meant less reliance on state benefits.

With a two band system you always hurt the middle income earner if you want to take more tax from the higher income earners, and if you increase the upper threshold of the lower band to benefit the lower paid you benefit everyone diluting the intended effect. A three band system make a lot of sense if the threshold are set at reasonable levels

Your understanding of the taxation of dividends is completely wrong

efanton

Robert McGrath wrote: »

Your understanding of the taxation of dividends is completely wrong

Well enlighten me, and I am not being sarcastic.

My understanding is that any profits can be dispersed to shareholders through dividend which are taxed at 20%. If there are no profits then obviously there can be no dividends.

What did I get wrong.