Tuesday, June 13, 2006

Tax

I recently got e-mailed an article from the Daily Mail titled Tax Rises, by a friend hoping to convince me that I should no longer be voting New Labour. And as I read, my blood did start to boil as it included such gems as "Increase of £45 in vehicle excise duty for gas-guzzling 4x4s cars" without mentioning the cut in vehicle excise duty of £35-£65 for fuel efficient cars.

It's like trying to calculate unemployment by counting only job-losses and ignoring jobs created or like trying to calculate inflation by focusing only on price rises in gas bills and determinedly ignoring any price cuts like the drop in the price of milk.

At the bottom of the article, the Daily Mail did admit that "Source: Grant Thornton, Institute for Fiscal Studies and Conservative party ". Of course you expect such dodgy thinking from the Tories - but Grant Thornton and Institute of Fiscal Studies, to the back of the class with you (though to be fair, it's entirely possible that the Daily Mail selectively published the data they were given).

I couldn't help wondering if there were other Labour tax cuts that were being completely ignored by the Tory press. With a little research, I came up with this list:


New Labour Tax Cuts

1. Cutting VAT on domestic fuel (electicity and gas) from 8% in 1997 to 5% now.

2. Cutting basic income tax from 23% in 1997 to 22%.

3. Introduction of the 10p starting rate of tax (lowest starting rate since 1962) for £2150 of earnings above the personal allowance.

4. Cutting large company corporation tax from 33% to 30%

5. Cutting small business corporation tax from 23% to 19%

6. Capital gain tax for long term business assets cut from 40% to 10%

7. Stamp Duty threshold raised from £60,000 in 1997 to £125,000 now

8. Vehicle excise duty for 38 tonne and 41 tonne lorries cut by 500 pounds; the 40 tonne class lorries rate cut by 1,800 pounds; for all other heavy lorries rates frozen. (2000 budget)

9. Abolition of the 2% employee N.I. "entry fee" payable on earnings from £0 - LEL, when earnings crossed the lower earnings limit.

10. Abolition of the 3% employer N.I. "entry fee" payable on earnings from £0 - LEL, when earnings crossed the lower earnings limit.

11. Abolition of the "stepped" employer N.I. rates, saving companies administration hassles.

12. Alignment of the LEL with the Income tax personal allowance. This involved increasing the LEL sharply from £64 per week in 1998 to £87 in 2001 and £97 per week today, which means the exempt threshold has increased by 51% since 1998 (or at a rate of 5.33% per annum, considerably faster than the rate of inflation).

13. Class 2 flat rate of self-employed N.I. reduced from £6.55 to £2.10 per week.

14. Freeze on duty on spirits since 1997.

15. Employee shareholders capital gains tax cut to 10%

16. Business investors in new and unquoted companies who invest between 5% and 25% have capital gains tax cut to 10% on investments above 5% held for four or more years

17. For small and medium companies, the 40% capital allowances are made permanent

18. Research and development tax relief introduced for business

19. Tax relief for intellectual property and goodwill introduced (2001 budget)

20. Abolition of withholding tax on payments of interest and royalties between companies in the UK.

21. Abolition of withholding tax on interest paid on international bonds

22. Working families tax credit introduced

23. Child tax credit introduced and extended for families who earn £58,000 and below

24. Introduction of stakeholder pensions which for the first time are available to the unwaged, giving then a tax-free savings vehicle where a contribution up to £2808 also attracts tax relief of 22%.

25. For businesses with turnover of up to £58,000, VAT is not charged at all.

26. To bring disused properties back into use, VAT on residential property conversions cut from 17.5% to 5%

27. For cleaning up contaminated land, an accelerated tax relief, set at 150%

28. To help revitalise high streets, government provided 150% first year capital allowances for bringing empty flats over shops back into the residential market.

29. For churchs, for repairs started after April 1st 2001, a new grant, the equivalent of a VAT reduction from 17.5% to 5%. This was further abolished to 0% in the 2004 budget.

30. Vehicle excise duty abolished for tractors

31. Betting duty abolished for pools.

32. Exemption for companies from corporation tax on the gains from the sale of substantial shareholdings. (2002 budget)

33. Automatic entitlement for business to reclaim VAT on bad debts after six months, introduced for the first time.

34. Betting duty abolished for bingo players

35. A 20p per litre reduction in fuel-duty for bio-ethanol

36. A 20p per litre reduction in fuel-duty for bio-diesal

37. Fuel-duty frozen for petrol and diesal since 2003.

38. Halving of beer duty for pubs that brew their own beer

39. People with disabilities who got back to work entitled to tax credit

40. Child-care tax-credit introduced for people who place their children in nurseries

41. Vehicle excise duty cut to £0 for cars emitting less than 100 CO2 g/km (saving of £65), cut to £40 for cars emitting between 101-120 CO2 g/km (saving of £35) and cut to £100 for cars emitting 121-150 CO2 g/km (saving of £5).


I gleaned the above from a couple of hours trawling the Treasury web-site - no doubt the accountants will be able to find much more tax cuts. Note also that I could have padded it out Daily Mail style by showing every single tax cut on a year-by-year basis - but I couldn't be bothered.

The most interesting thing about the above is the way the tax-cuts have been targetted at lower earners and at business. The raising of the N.I. LEL threshold and the abolition of the "entry fee" for employers and employees clearly contributed hugely to it being worth-while for low-paid people to seek work, and for busineses to hire them, bringing down the unemployment rate. The support for business is also down to the government's eagerness to ensure that they continue to employ people. The child-tax credit also contributes hugely to supporting working parents .

The above list also gives lie to the whole Daily Mail/Tory party propaganda that this government is an Old Labour government that only raises taxes. New Labour clearly has no ideological opposition to tax cuts at all - they are merely keen to target them at the poor and at people with children.

In effect Labour have altered the burden of taxation slightly, with the poor benefitting and the rich paying slightly more, while making sure that the total tax-take as a % of GDP has remained broadly stable give or take a % point, over the last decade.

11 comments:

Mike Ion said...

Welcome to blogging - I read almost all of your posting, will your contributions always be this long?

Mike

snowflake5 said...

sorry for the length - I'm new to this - also, hadn't expected to find this many Labour tax cuts LOL

Skuds said...

Is the reason that there is not greater awareness of these cuts that they are all 'stealth' cuts?

Nice piece of work.

snowflake5 said...

Hi skuds. Yes, the cuts have been done quietly. But there is also the tendency of people to pocket the benefits and forget about them and moan about somethimg new. And among 20-somethings, they actually believe all the good stuff done by Labour was achieved by the conservatives, so powerful is the propaganda that the Tories cut taxes and Labour raises them.

JamesZ said...

Welcome to blogging from me also! That is a spot-on post, I wish mine were half as well researched! It's probably like with most things, people only really like to hear bad news and the media are only too happy to report it. Combatting that level of cyniscism is very difficult.

Danivon said...

Can people unashamedly steal your list of 'tax cuts' and post them on their own blogs? This is fantastic work...

snowflake5 said...
This comment has been removed by a blog administrator.
snowflake5 said...

Yeah, go ahead - just put in a caveat that it came from a blogger who trawled through the treasury web-site and that it hasn't been audited or checked, and may have some (unintentional) errors. Also, if you are posting the list, make sure you post the original Daily Mail link showing Tax Rises.

You can't really show the one without the other, unlike the Daily Mail, we don't want our side to mislead.

The point is that New Labour tend to be Fiscally Neutral - if they cut somewhere (eg VAT on domestic fuel), they have an offsetting rise (council tax) so that while overall the tax take remains the same, the mix is different (slightly less on the poor, slightly more on the rich). This is how the poor have been lifted out of poverty.

This is the opposite of what Thatcher did - raised tax on the poor (almost doubling VAT) in order to cut tax for the rich.

Another example: They abolished ACT in order to be able to cut corporation tax (both were done at the same time). Labour figured that cutting corporation tax would help the company (and hence the share holder) more as the profits ater tax would increase, which the company could either distribute as increased dividend or retain for investment. Also increased profits after tax = increased earnings per share = a higher share price. Yet all the Tory press talk about is the ACT abolition as though it was done in isolation.

The majority of Brits are better off under Labour (and you could argue the rich are better off too as inflation is under control and not eating away at their wealth).

Richard W. Symonds said...

Take a look at the 'tygerland.net' blog...what do you think ?

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