If the government wanted people to pay a flat rate of tax, then it should introduce a flat rate. But it does not.
Throwing a distracting handful of dust in the eyes of his critics, Nick Clegg told his party’s spring conference that he wanted to introduce a ‘tycoon tax’ to ensure that everyone pays an absolute minimum of tax: ‘We will call time on the tycoon tax dodgers and make sure everyone pays a fair level of tax,’ he declared. This would be 20 per cent, he suggested. And this on top of Vince Cable’s ‘mansion tax‘!
Never mind that no-one else seemed to know about this – not even David Cameron or George Osborne – or that his Lib Dem colleagues disagree – Vince Cable’s ally Lord Oakeshott said the proposal was ‘a superficially attractive measure that falls apart under scrutiny and does nothing to do with the super rich non-doms and non-residents’.
A Lib Dem on last night’s Westminster Hour on Radio 4 pointed out the biggest problem with this tax level even as he tried to support it: he said HNWs should not use entrepreneurs’ investment relief or philanthropic donations to avoid paying tax. (Does he want no HNW to invest in start-ups or give to charity ever again?) The tax system is riddled with potential deductions becuase it used to make social policy.
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If the government wanted people to pay a flat rate of tax, then it should introduce a flat rate. But it does not – it wants to use the tax system to support this or discourage that, in which case it should not be surprised when people do that, whether through ‘pure’ or tax-dodging motives. A tycoon tax is not the answer – a more sensible tax system is.
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