Source: Taxpayers Union
9 SEPTEMBER 2020FOR IMMEDIATE RELEASEThe new tax rate announced today by Labour of 39% for high earners will raise even less revenue than Labour expects, as earners will shift income to companies and portfolio investment entities (PIEs) which are taxed at 28%.Responding to Labour’s tax policy announced today, Louis Houlbrooke, a spokesman for the Taxpayers’ Union said:“Advice to the Tax Working Group and successive Governments has been clear: uncouple the company rate from the top income rate at your peril. This will incentivise every high income earner to call their accountant to shift income flows over to companies and investment vehicles. We know of cases where doing so will actually result in high income earners paying less tax overall.”“This isn’t some tricky loophole – Grant Robertson is leaving room for a jumbo jet. It abandons decades of a tax system that doesn’t incentivise shifting income into companies and investment vehicles. The big winner here is the accounting profession.”“This tax probably scratches an ideological itch for Labour’s core supporters. But it won’t bring in the money Grant Robertson expects, and certainly won’t get the economy moving fast enough to pay down the enormous debt being mounted. Even using Labour’s revenue forecast, the new tax bracket pays off just one percent of the Government’s COVID-19 response each year!”“The only realistic option to slay the Debt Monster is to cut low-priority spending. We’re still waiting to hear Labour’s plans on this front.”On the promise of no new taxes, Mr Houlbrooke says: “We certainly welcome the commitment not to introduce new taxes. But it’s difficult to have confidence in this promise when the Green Party, who may hold the balance of power, are running hard on a ‘wealth tax’ proposal.”
