ALEX BRUMMER: Soak-the-rich tax policies drive businesses and managers offshore

ALEX BRUMMER: Soak-the-rich tax policies drive businesses and managers offshore

Tax deadline day in the US is always greeted by queues outside the offices of H&R Block, the specialists in completing America’s notoriously co

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Tax deadline day in the US is always greeted by queues outside the offices of H&R Block, the specialists in completing America’s notoriously complex returns.

This year there is a new trend. Wealthy New Yorkers are switching tax domicile from the Big Apple to low- or no-state income tax zones such as Florida.

In the small print of Donald Trump’s epic tax cut package, which became law in 2017, was a provision that local income tax (in New York it can be as high as 12.7 per cent) can only be deducted on federal tax returns up to $10,000. 

Jeremy Corbyn and Shadow Chancellor John McDonnell want to raise the top rate of income tax to 50 per cent and impose taxes on the wealthy

Jeremy Corbyn and Shadow Chancellor John McDonnell want to raise the top rate of income tax to 50 per cent and impose taxes on the wealthy

For Wall Street’s high rollers this represents a huge tax rise, which is driving wealth creators to move residence.

The relationship between high taxes, investment and output is sensitive. When President Hollande of France raised the top rate of income tax to 80 per cent, there was an immediate exodus of French entrepreneurs and traders to London and other locations.

It is worth bearing this in mind as Britain contemplates a Corbyn government with plans to raise the top rate of income tax to 50 per cent, impose taxes on the wealthy and possibly seize up to 10 per cent of the capital of every company with 250 employees.

The evidence from New York and France of what happens when governments aim to squeeze the pips of the wealthy is unambiguous. Entrepreneurs are driven out and investment and job creation takes a beating.

The Thatcher government’s dismantling of a Labour structure that saw the well-off paying more in taxes than they earned, brought businesses, entrepreneurs and the wealthy back from overseas.

George Osborne’s decision to reduce Labour’s hike in the top rate of income tax from 50 per cent to 45 per cent saw no loss in revenues as employment in the UK reached record levels along with tax receipts. 

In 2010, receipts from a 28 per cent corporation tax were £35.5billion. After the cut to 19 per cent, corporation tax income climbed to £58billion in 2018/19.

You don’t have to be a messianic supply-sider to recognise that the higher the taxes on the well-off and business, the greater the disincentive to invest. 

Jeremy Corbyn and Shadow Chancellor John McDonnell will kill the golden goose which delivered record employment in Britain if they continue to pursue soak-the-rich tax policies which drive managers and businesses offshore.

Poor deal

Claims by sprightly Non-Standard Finance (NSF) boss John van Kuffeler that he is a person who investors, regulators and customers can rely upon to clean up Britain’s sub-prime lending industry by absorbing Provident Financial are threadbare.

Van Kuffeler, armed with the support of major investors, claimed victory when the irrevocable support of shareholders tipped over the 50 per cent mark.

But with 90 per cent acceptances required (although it could seek a lower threshold), full victory is not assured.

Van Kuffeler’s case has been that NSF’s regulatory record is better than that of Provvy, and his superior understanding of the enterprise makes his leadership preferable to that of the other friend of the poor, Malcolm Le May.

There could be something to that, given that Le May is occupied finding a chairman for spread-betting group IG. But van Kuffeler does not inspire much confidence either. 

Regulator the Financial Conduct Authority (FCA) has already intervened to warn NSF against the danger of lifting controls on lending and putting in place new incentives.

After the London Capital & Finance mini-bond scandal blew a hole in the FCA’s reputation, it is unimaginable that regulators are going to nod through the NSF deal.

That is especially true following the admission that NSF has been in technical breach of the Companies Act by paying dividends out of reserves and through an intra-company transaction in 2016. 

None of this suggests that van Kuffeler or NSF are fit and proper stewards to be lenders to Britain’s vulnerable and least credit-worthy borrowers.

Before any deal is done, van Kuffeler and Le May must put personal ambition to one side, resign and allow new management teams to settle before proceeding with a potentially disastrous merger for all involved. That includes the embattled FCA.

Ginastics

Has desperation set in at Waitrose? After providing free coffee and copies of the Daily Mail, it has jumped on the gin bandwagon and is offering designer tastings at home.

Next, perhaps, midlife makeovers in the empty aisles.

 

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