HMRC should suspend office closure plan, MPs say

Further staff reductions and the planned closure of most of HMRC’s remaining offices could “seriously compromise” the tax authority’s ability to enforce compliance and close the tax gap, members of parliament warned in a cross-party motion approved at the end of a sparsely attended Commons debate on April 28. Read more:

  • My news story at Tax Notes (paywall)
  • Hansard transcript of the debate
  • Some of my observations on Twitter – below

Continue reading HMRC should suspend office closure plan, MPs say

More than 20 countries sign up to automatic information exchange

The world is moving firmly in the direction of greater tax transparency, U.K. Chancellor of the Exchequer George Osborne declared after 19 European countries joined a pilot scheme for automatic exchange of information on beneficial ownership, launched by the G-5 European economies earlier this month. Read more: My news story for Tax Notes (paywall) published by Tax Analysts.

UK lawmakers reject call for public inquiry into Panama Papers

UK members of parliament rejected a call for an immediate public inquiry into the Panama Papers revelations, following a three-hour debate in which the government defended its record in tackling tax evasion and avoidance. Read more: My news story for Tax Notes (paywall) published by Tax Analysts.

What is your income tax rate? It should be a straightforward question, but it isn’t

MPs will debate the new Finance Bill on 11 April. Some of the most difficult measures to understand concern matters that should perhaps be the most straightforward – such as personal income tax rates.

Wherever you stand on “tax simplification”, the complexity in this area is hard to justify.

For tax year 2015/16 there were three main rates of income tax:

Basic rate 20%

Higher rate 40%

Additional rate 45%

In addition, there was a 0% starting rate for savings.

Dividends were taxed at one or more of the following rates (subject to a tax credit):

Dividend ordinary rate 10%

Dividend upper rate 32.5%

Dividend additional rate 37.5%

For tax year 2016/17 there is a new savings allowance (as well as the starting rate for savings) and a new dividend allowance.

But neither of these is really an allowance. For savings, there is effectively a new 0% band of either £1,000 or £500 or nil – depending on your tax rate. For dividends, there is a new 0% band of £5,000, and dividends in excess of that are taxed (and there is no tax credit) at:

Dividend ordinary rate 7.5%

Dividend upper rate 32.5%

Dividend additional rate 38.1%

The changes necessary to bring in the new dividend tax regime, and deal with the interaction between the various rates and bands, occupy seven pages of the Bill.

I haven’t considered here the potentially different Scottish and Welsh rates of income tax, nor national insurance contributions, nor the issue of marginal tax rates (and marginal deduction rates for those receiving tax credits or other benefits). Some of the marginal rates are very high, creating cliff-edges and perverse incentives at various levels of income.

What does this have to do with the Panama Papers? Nothing – but if you’re interested you can follow me on Twitter where I’m keeping an eye on developments, and I may say something on the blog soon.