Economics of Taxation

There are in essence only two ways of taxing citizens:

1. A Tax on Stock (Wealth)
2. A Tax on Flows (Income or consumption)

Within these two tax methodologies are hidden the minutiae of  the tax regime system, but at a fundamental level, any tax raising authority has to look at these two options / methodologies available to them.

Now step back second and consider the tax take flows from  these two options:

With Incomes and consumption generally on the wane, where  else can the taxing authority turn for sustaining or growing their net tax take?  Only on the stock of capital  assets held by its citizens, so expect a sustained, possibly nuanced, yet blatant attack on your net wealth over the coming few years.

Another salvo  was  launched again from the Business Secretary, Vince Cable, yesterday and we expect a sustained rhetoric and action in the next budget cycle.  Today, the main stream press are reporting rumour of lower the 50% rate to 45%, to encourage an inflow of entrepreneurial  and highly skilled management talent, reversing the recent drain or threat of ‘brain  drain’ from taxpayers in this tax rate band.

theMarketSoul ©2011

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