It’s the howling ignorance that is so painful

Tax them, tax them over there to pay for what we want! Not exactly an unusual cry, rather the meat and drink of populist politics in fact. But this latest call for higher taxation of the rich - the ignorance is astounding:

GND Rising’s Pay Up campaign staged a day of action last week during which more than 200 young people targeted sites connected to Britain’s ultra-wealthy, including the billionaires Jim Ratcliffe of Ineos, the Reform treasurer Nick Candy, and the founder of Bet365, Denise Coates. It said it intended to step up its campaign for a fairer tax system over the summer.

Ratcliffe is non-resident and non-domiciled. The UK tax system simply doesn’t apply to him. We know nothing of Candy’s tax arrangements so cannot comment. But Coates, ah, yes:

The 57-year-old Denise, who has described herself as the “ultimate gambler”, paid herself £95m this year and is also entitled to at least half of the £110m dividend that the company paid, based on her shareholding of more than 50%.

The total £150m payout is significantly down on the previous year, when she awarded herself £270m, and far below the record-breaking £466m she collected in 2020. In 2021, Coates collected £300m.

So, a chunk of that is paid as wages. Upon which she will pay 45% income tax and 2% national insurance (the lower rates and allowances are irrelevant at this level). Also, 15% employer national insurance (this year). The portion paid in dividends will have been taxed (this year) at 25% in corporation tax. The dividend itself will pay 39.35%.

So, the tax rate faced on £100m in pay is 15% NI then 47% of the rest - 15 plus 38.25, or 53.25%. On the dividends 25 plus 28.69 or 53.29%. Which is how the tax system is designed to work of course, rates of tax on dividends and pay are meant to equalise.

If we assume that Bet365 itself is worth £12 billion (20x profits for one of those years at least and so using the Saez and Zucman capitalisation method) and that Ms Coates owns half then that 2% wealth tax would be £120 million on her £6 billion stake.

So, the claim is that someone already paying 53% of income in tax is so grossly undertaxed that they should pay another £120 million? Or, if we take the £150 million for one year at 53% plus the 2% wealth tax then her total tax rate is 133%.

Well, yes, that’ll encourage business development, investment and entrepreneurship, won’t it?

Just why is it that anyone at all is listening to people so ignorant of our tax system when they shriek about taxes?

Ah, yes, populist politics, such a wondrous way to run a country.

Tim Worstall