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Labour MP raises prospect of top rate of tax rising beyond 50p

Senior Labour MP Frank Dobson says the top rate of income tax should be “at least 50p” in order to raise more money from wealthy individuals.

Speaking in a debate on the Finance Bill in the House of Commons yesterday, Dobson, who served as Health Secretary under Tony Blair, attacked bankers’ pay and the Government’s decision to cut the top rate of income tax to 45p.

He said: “[It] is particularly irksome for badly off people in this country to hear apologists for the City talking about bankers’ compensation packages—compensation apparently for the horrid requirement that they turn up at work. The dictionary definition of compensation is “recompense for loss, suffering or injury”.

“Those bankers—how they suffer when they are helping people to swindle their tax liabilities; laundering money for gun runners or drug runners; or fiddling money to help people evade sanctions and then having to pay up. We clearly need to ensure that those rich people pay more tax, and the only way to do that is by increasing the rate to at least 50p.”

He added: “We constantly hear from those on the Tory benches about the wonders of Mrs Thatcher and how we should follow her example, so I remind them that for 9 of the 11 years that she was Prime Minister, the top rate of income tax was 60p in the pound. Apparently, people managed to pay it. Apparently the money came in, and even rich people did not need a greater incentive to turn up at work.”

Responding for the Government, Treasury exchequer secretary David Gauke said: ”I suspect that he speaks for many of his colleagues in that regard. The fact is that there is an ideological divide involved here, in that the opposition want the higher rate, regardless of the practicalities.”

Dobson also attacked the Government’s “ignorant” resistance to “sensible” proposals for a Financial Transactions Tax.

In April, the European Court of Justice rejected a legal challenge from the UK against 11 EU member states introducing the levy through a process known as ‘enhanced cooperation’.

The British Government lodged the complaint in an effort to stop 11 EU member states, including France and Germany setting up the tax which the UK fears will tax UK firms and transactions.

Dobson said he has repeatedly asked the Treasury for estimates it had made about the potential impact of the tax, but has received nothing.

He said: “Having never made any estimate of the possible income—and apparently never estimating what it would cost the City of London—the Treasury nevertheless states that it would be fatal for the City to impose a tax of 0.05 per cent on financial transactions, when every other business in the country pays a 20 per cent tax on transactions known as VAT.”


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There are 19 comments at the moment, we would love to hear your opinion too.

  1. Well isn’t that a surprise—-a “socialist” government that wants to rob the rich to waste on benefits to the unemployable.
    If they get elected I can already feel the hand of the IMF on the national collar!!!
    They seem incapable of learning from the past.

  2. I still have the tax schedule from the 1978 budget. Highest rate = 83% with a 15% Investment Income surcharge. No surprise then that the lost the 1979 election.

  3. The people described by Mr Dobson probably do deserve to be taxed out of existence. Do we sacrifice all the hard-working people who put in the hours, create jobs and do social good at the same time? Why should they do all this to see more than half their earnings disappear only to pay another 20% when they buy something with what they do get?

    Sound-bite politics at it’s worst and fodder for all the non-thinking masses. What happened to intelligent debate?

  4. I think I saw something recently that stated 80% income tax paid is paid by 20% of the population. So its not really that fair a system after all. At what stage do you tell the truth. I would not mind if the taxes paid actually were spent effectively, such as reducing the countries debts and not wasted.

    Being old and grey and having lived through two of Labour over spending self inflicted nightmares. The first time I can remember the IMF refusing the UK any further funding, 22% inflation, 15% mortgage rates and income tax rates that would make your eyes bleed. The second time we all nearly went bankrupt, nearly returned to the dark ages and have seen our Nations Wealth reduced by 1/3 and faced with decades of pain to resolve.

    History seems to repeat its self and after many years of Labour we then spend decades sorting the mess out, only to make the same mistakes all over again.

  5. Richard Murphy 2nd July 2014 at 12:58 pm

    It’s just typical of this country’s small mindedness – if you’ve done well you have to pay for it…why not tax the companies and actually collect it?
    Google, Starbucks, Boots, HSBC, Lloyds TSB, NatWest, Vodafone- estimated to cost the state £95bn a year

    Also why not add tax to the goods (non essentials like childrens’ clothing and food) and abolish income tax and NI?

  6. Gordon Sinclair 2nd July 2014 at 2:53 pm

    @ Richard Murphy

    “Also why not add tax to the goods (non essentials like childrens’ clothing and food) and abolish income tax and NI?”

    I may be reading this wrong but did you just state that childrens clothing and food are non essentials??

  7. Richard Murphy 2nd July 2014 at 4:39 pm

    yes it’s unclear isn’t it…I meant to write ‘(not essentials, like children’s clothing and food etc),’ not ‘non.’

  8. Richard Murphy 2nd July 2014 at 4:45 pm

    and just to put that into context, HMRC raised £155bn in income tax in 2012and the companies avoiding tax ‘cost’ us all (taxpayers) an estimated £95bn. Dodgy Dave and the LibDems keep very quiet about that…
    Why aren’t people outraged?

    I don’t hear people calling into radio shows to complain about Vodafone or Boots!

  9. @Richard Murphy

    You can’t tax business, you can only tax people. A tax on companies has to be paid either by shareholders, customers, or employees. The consensus of research suggests that 60% of corporation tax is paid for by employees through lower wages.

    Corporation tax is a stealth tax because it isn’t clear to the people who pay it that they are being taxed. I would rather shareholders were taxed directly on dividends, customers were taxed directly on purchase price, or employees were taxed directly on wages (hey, all those things happen!), so people can see exactly how much government is taking from them. Also, those three taxes are harder to avoid than corporation tax is, so it makes it more likely that the money would actually be collected.

  10. If everyone – individuals and corporations, paid the tax they were supposed to, we wouldn’t be having to have debates like this.

  11. Richard Murphy 3rd July 2014 at 2:08 pm

    @Smithy0364Well said – I couldn’t agree more.

  12. Richard Murphy 3rd July 2014 at 2:12 pm

    @Chris i think that the purest form of tax is on goods. However, that’s academic. Large companies like Boots, Starbucks, Nat West etc freeloading on the back of our tax being used to educate their workforce, pay for the roads that get their customers to their stores and then cheat us all by putting their operations offshore is fundamentally wrong. IMHO.

  13. @Richard Murphy & Smithy

    With tesepect I think you are missing the main points which are:

    If the tax is considered too onerous and the tax code too complicated people and companies will naturally take advantage of any legal loopholes presented. AS far as firms are concerned one coul;d arguw that it is ytheir duty to pay the least tax possible and using waht is commonly referred to as ‘The tax shield of debt’ is a common and legitimate ploy.

    Ta receipts are at their highest when the code is simplest and the burden ios lightest as it isn’t worthwhile avouideing. This was never better demonstrated than in the Thatcher era. (see my comments pre 1979)

    I’m sure you are all well aware of the quote by Jean-Baptiste Colbert, Louis XIV Minister of Finance:

    “”The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing …

    Perhaps the numpties in Westminster would be advised to take note.

  14. PS Apologies for the typos. One of the rare posts I have typed myself. (And it shows!)

  15. It is within the power of every government to amend the tax rules to close the loopholes which companies such as Amazon exploit. To complain that companies take action to reduce the amount of taxes they pay (which is a duty for those who run the company on behalf of shareholders) is simply ridiculous. To state anyone “has a duty to pay tax” is simply moronic. I quote Lord Clyde, “No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”. As true today as it was in 1929. You only have to see the actions taken by MPs detailed by the enquiry into the expenses scandal to understand that they follow this rule as much as anyone.

  16. @ Paul Howorth

    The voice of common sense. Thank you.

  17. Richard Murphy 7th July 2014 at 3:16 pm

    if that’s the voice of common sense then god help us.

    Of COURSE it’s in the power of govts to close loopholes, but don’t you think it’s strange that they don’t?
    Don’t you think it’s strange that rather than go after big tax avoiders they instead introduce bedroom taxes, cut NHS spending, demonise those on benefits and basically take from the most vulnerable in society whilst protecting their cronies, the most powerful?

    If that’s common sense then you can keep it.

  18. Ah Richard!

    I guess we shouldn’t expect one who appears to be Red in tooth and claw to understand.

    In principle you have to nurture those that make the biggest contribution. Unfortunately those whom you don’t admire also think they are hard done by.

    Therefore this Government seems to alienate both sectors of the community – the have’s and the have less.

  19. There is already a rate of income tax in excess of 50%. It’s deducted from parents who receive child benefit and have earnings between £50-£60,000.

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