The Dangers of a Cashless Society.

cantersaddick said:

Rob7Lee said:

cantersaddick said:

Rob7Lee said:

cantersaddick said:

Rob7Lee said:

cantersaddick said:

cafcfan said:

blackpool72 said:

valleynick66 said:

blackpool72 said:

ME14addick said:

Algarveaddick said:

ME14addick said:

Algarveaddick said:

ME14addick said:

SomervilleAddick said:

Rob7Lee said:

Algarveaddick said:

Rob7Lee said:

Algarveaddick said:

Dugdaleclass said:

Interesting to hear from people who work in the financial services sector and their take. Since the pandemic I have to admit leaving cash in a drawer and relying on cards to pay for anything and everything. In fact the only time I have had to carry cash at all was on a visit to Japan (one of the most advanced technological countries but still a society which prefers the colour of your money when making transactions).

High Street banks are pushing for their customers to take responsibility for their own banking through the use of apps. All well and good for those who prefer the tech...but perhaps not for older customers who often have the more substantial accounts. I still insist on monthly paper statements so I have a record in writing of my transactions. 

The 'cash or card' title of this thread is already moving towards being obsolete given that increasing numbers of people are relying on their phones to pay for everything. Great if this is how you like to spend. So easy and accessible. Not so great if you lose your phone or it's nicked. 

You have to take your hats off to them, they are doing less and less and earning more and more. And people just meekly accept it for the "convenience" of waving a phone at a terminal.  

Have to call this one out.

for the man (or woman) on the street, with a current account waving their phone at a terminal - what exactly is the cost? Nothing additional over cash and still 99% of people pay nothing for their day to day banking.

I thought the merchant paid the bank for the "service"?

As does the merchant to take (bank) cash. Ask most smaller businesses/shops and cash is far less convenient, cost of the banking and the hassle of cashing up, taking to the bank etc.

For the end user, paying by cash or paying by card/phone etc is no different - it’s free to them.

I think many people don’t understand the cost of using cash - it was so common everyone assumes it’s free, but it’s wasn’t. Aside from printing non-counterfeitable notes, transporting them in secure transport to branches must have been a significant cost. In my limited time working in a branch, we had cash delivery in the morning, and pickup in the evening to ensure there wasn’t too much on site. There’s the opportunity cost of having to hold a whole bunch of cash to cover expected operations. Multiple staff to handle clients cash transactions, plus the cost to retailers of having to handle cash. It was never free, just hidden. 

My first job was with one of the big four retail banks and there were big costs to handling cash. Doing away with cash also reduces money laundering & tax evasion as it's not so easy to hide digital transactions. 

The real criminals will always find a way to launder money and evade tax, in huge amounts. Making society card only just reduces the chances of the little guy getting a break from the tax man... 

The little guy should pay their taxes as much as anyone else. Tax evasion is wrong whoever it is. 

Morally you are quite right of course Emme, and if the little guy had access to the same tax breaks the big guys did, I would agree, but while multi-millionaires are given the opportunity to reduce their tax bill left right and centre and poor people are not, I am not going after those the bottom of the food chain.

Like I said, the real criminals will still find a way to launder money and evade tax, cashless society or not. 

People on PAYE have to pay their share of tax, so should everyone else. We all.lose out when others cheat the system. 

How many Billionaires do you think are on PAYE 

What they get away with compared to say a window cleaner taking cash only is ridiculous. 

What do they actually get away with though ? I know the statement is made but does it bear scrutiny?

Thats not to say some sort of Wealth Tax isn’t appropriate. 

The real issue remains the gap between the top and bottom earners. 

Your last sentence is bang on the money 

I don't want to turn this in to a political debate for obvious reasons.  But the last sentence really is bang on the money.  In the tax year 1978/79 the bottom 50% of taxpayers contributed around 20% of income tax and the top 10% about 10%.
Whereas in 2023/24, the bottom 50% contributed around 10% of income tax while the top 10% lobbed in 60%. (Of which the top 1% chipped in around 30%.). So, how much more should the well-off pay, just out of interest?

Looking at earnings is where you are going wrong here. Wealth taxes and the argument to tax the rich are not talking about earnings. The top 20-25% wealthiest in the UK do not make their money through earnings. They may make some earnings (likely for tax or legal purposes) but most of it will be their wealth generating more wealth at a rate much greater than earnings can be made. 

The tax wealth not work campaign have made it clear it means all people paying income tax would pay less as they (the ones who make the majority ofbtheir money through earnings) are not the ones it is aimed at. Gone are the times when being a top earner and paying high income tax made you wealthy. That's simply not the case anymore. Those with serious wealth don't get it from earnings.

So to correct the original claim: The real issue remains the gap between the top and bottom wealthiest. 

Isn't the assumption there though that those with a lot of asset (and appreciating assets) aren't paying taxes? In my experience that's far from correct.

I can think of a number of people who would fall into the type of wealth tax you are proposing,  yet they at the same time are saying huge amounts of income tax (amongst others) and always have.

I'm afraid it's not an assumption. There are always exceptions as demonstrated by the patriotic millionaires group, who are one of the sponsors of our paper, but as said those with a £50m+ net worth are a small enough cohort to look at a lot of people individually. There's plenty of research out there already which the paper draws on and brings lots of its own primary research too. Some of them pay what at face value sounds like a lot of money but when taken as a proportion of income from all sources is rarely above the 4% mark. As said at that level of wealth tax effectively becomes optional. 

If I look at those I know with wealth above £50m the above is incorrect. Most have achieved that wealth through work, have paid huge sums of income tax, CGT etc along the way so whilst they may have huge sums now in asset most has been bought through taxed earnings and earnings made on those assets will be taxable.

if there’s loopholes the wealthy are using (one assumes legally) change the tax laws.

Its a bit like the people (Gary’s economics for example) who throw out lazy one liners such as the Duke of Westminster pays no tax where as I was paying 50%, in total tosh.

PS would be love to know how someone only pays 4% on earnings…….

You always know lots of people who happen to be the exception to what the data, evidence and research shows!  

The plural of anecdote is not data. 

Yes as said maybe the amounts sound large but at that level of wealth if you take it as a proportion of total income from all sources it suddenly shows it to be tiny compare to income tax rates. Even if someone pays everything they are supposed to. 

I'm principle changing the law to close loopholes sounds sensible but it’s been tried and failed. The system is so complex those paid to find ways to avoid are mire in number and paid so much more than those paid to close it. The proposal effectively says, take a step back look at society as a whole, look at those at the very top with the most ability to pay but yet are in a majority of cases cases paying proportionally less than someone on 50k salary. Let's find a way to target these people for a bit more (that tbh they won't notice) even though it still doesn't equalise that rate.

Sadly I work in an industry where there are many very rich people (people earning £2m+ per annum some with 100m+ in asset).

those I know pay huge sums of tax, whether you look at that from a total £ or % base. All would be paying higher % of tax on their income than someone on £50k

If you're only making them 2m on 100m I'd say you need to be doing a better job. 

Or perhaps you're massaging the figures downwards by only looking at cash flow/withdrawals and excluding growth in asset holdings which is literally the entire point of the wealth tax conversation.

£2m of PAYE salary so very roughly £1m of tax, £100m of separate asset which may or may not produce income (which if it does will also incur tax). Not all asset is producing income.

we had a guy retire end of June who would have been one of those. I don’t know the ins and outs of his investments, but he has around £15m of property that he lives in here and abroad and is a total petrol head and probably has £40m+ of cars - none of which produce income (but some may appreciate in value).

as I’m sure you know if some has assets that appreciate then generally on disposal tax is payable.

Rob7Lee said:

bobmunro said:

The semantic argument about what is income/earnings/wages/payment for laboue etc... is meaningless. Income is 'incomings' for which there is a tax liability.

Now let's look at actual figures as percentages are misleading in my opinion. 

Income £50,000 = tax of £7,500

Income £100,000 = tax of £27,500

Income £1,000,000 = tax of £435,000

This assumes no clever tax avoidance schemes, and anyone on PAYE hasn't got a chance of avoiding tax. So tax as it is due.

So someone earning £1,000,000 (20x that of someone who earns £50k) pays 58x the tax. That seems pretty progressive to me (and you will all know my politics are left of centre).

Let's get on to wealth tax. Let's say I earn £10m pa - I pay tax of approximately £4.5m. I invest a high proportion of that net income in assets (property, art, classic cars, whatever) and when any of those assets are realised I pay CGT if applicable. Why should I then pay an additional wealth tax on my net worth, accumulated from net income?

But surely you’re paying less than 4% on your income, Bob? 🤔

Much less

ShootersHillGuru said:

Algarveaddick said:

valleynick66 said:

O-Randy-Hunt said:

valleynick66 said:

O-Randy-Hunt said:

I lose about £50 a week in card fees unfortunately. About £200 a month which would be nice in my pocket but there is nothing I can do about it. I just have to suck it up. It's a shame the card machines have to be so greedy and charge a high percentage on my earnings.

But conversely you would always have paid charges for paying in cash either directly or indirectly. 

You may save on insurance by not having as much cash on the premises and save time by your receipts being automatically credited to your account. You / your staff have less risk of robbery etc. 

We all want to pay the minimum fees naturally but there are mitigations / compensatory points to handling less cash is my observation. 

Unless im being dumb and missing any hidden charges, its never cost me a penny as I'm passing by a bank paying in the cash I get. I also don't have staff. Like I say there is nothing I can do as I can completely see its much easier to just tap a card as a customer. I do it myself at times but also always have a wallet with cash in. I just pick and choose who I pay cash or card with.

It's just annoying someone always wants a cut of your earnings and the card machine i use takes around £10-£15 a day from me.

Most business bank accounts have a fee was my point. 

Depending on the tariff cash may be a separate element. 

If you have managed to avoid that due to volumes you pay cash in so be it. 

As a minimum though cards must save you some modest time in going to the bank and Counting the cash etc. 

So they have that fee whether you use cash or card, and for some people cash is better. That being the case, leave it up to the individual. As I have said before on this thread, I am not advocating that people can't use their card, carry on if you want, but let those that prefer cash (or both options, as is my preference) carry on too. 

As for the time taken banking, if it takes ten minutes and it saves £20, that's a rate of £120 an hour...   

What doesn't save me time is standing behind a bloke in a pub whose watch doesn't work, so then he gets his phone out and is then told "No tap it on the top, not on the front" and then has to put his PIN in because it is his nth transaction, all to pay £4.90 for a pint... 

You could argue I have the same issue with the bloke in front of me fumbling for his wallet. Handing over his £10 note, the bar person walking to the till. Waiting for their colleague to finish. Ringing up the sale,
 Getting the change and walking back to the customer to hand over his change. All for a £4.90 pint

You could. 

bobmunro said:

The semantic argument about what is income/earnings/wages/payment for laboue etc... is meaningless. Income is 'incomings' for which there is a tax liability.

Now let's look at actual figures as percentages are misleading in my opinion. 

Income £50,000 = tax of £7,500

Income £100,000 = tax of £27,500

Income £1,000,000 = tax of £435,000

This assumes no clever tax avoidance schemes, and anyone on PAYE hasn't got a chance of avoiding tax. So tax as it is due.

So someone earning £1,000,000 (20x that of someone who earns £50k) pays 58x the tax. That seems pretty progressive to me (and you will all know my politics are left of centre).

Let's get on to wealth tax. Let's say I earn £10m pa - I pay tax of approximately £4.5m. I invest a high proportion of that net income in assets (property, art, classic cars, whatever) and when any of those assets are realised I pay CGT if applicable. Why should I then pay an additional wealth tax on my net worth, accumulated from net income?

I'm all for using figures rather than percentages, it puts things into perspective for the layman. 

In this example, the lowest income person v the highest. 

If you look at what is left over after tax, and calculate the buying power using the average weekly food shop - I found a figure of £157 - a year's salary will pay for Mr £50k's shopping for five years, while Mr £1m will be able to pop to Sainsbury's for the next 69 years without earning another penny. 

*EDIT* I was writing this while jose was posting his, apologies for the crossover. 

/Rob7Lee said:

cantersaddick said:

Rob7Lee said:

cantersaddick said:

Rob7Lee said:

cantersaddick said:

cafcfan said:

blackpool72 said:

valleynick66 said:

blackpool72 said:

ME14addick said:

Algarveaddick said:

ME14addick said:

Algarveaddick said:

ME14addick said:

SomervilleAddick said:

Rob7Lee said:

Algarveaddick said:

Rob7Lee said:

Algarveaddick said:

Dugdaleclass said:

Interesting to hear from people who work in the financial services sector and their take. Since the pandemic I have to admit leaving cash in a drawer and relying on cards to pay for anything and everything. In fact the only time I have had to carry cash at all was on a visit to Japan (one of the most advanced technological countries but still a society which prefers the colour of your money when making transactions).

High Street banks are pushing for their customers to take responsibility for their own banking through the use of apps. All well and good for those who prefer the tech...but perhaps not for older customers who often have the more substantial accounts. I still insist on monthly paper statements so I have a record in writing of my transactions. 

The 'cash or card' title of this thread is already moving towards being obsolete given that increasing numbers of people are relying on their phones to pay for everything. Great if this is how you like to spend. So easy and accessible. Not so great if you lose your phone or it's nicked. 

You have to take your hats off to them, they are doing less and less and earning more and more. And people just meekly accept it for the "convenience" of waving a phone at a terminal.  

Have to call this one out.

for the man (or woman) on the street, with a current account waving their phone at a terminal - what exactly is the cost? Nothing additional over cash and still 99% of people pay nothing for their day to day banking.

I thought the merchant paid the bank for the "service"?

As does the merchant to take (bank) cash. Ask most smaller businesses/shops and cash is far less convenient, cost of the banking and the hassle of cashing up, taking to the bank etc.

For the end user, paying by cash or paying by card/phone etc is no different - it’s free to them.

I think many people don’t understand the cost of using cash - it was so common everyone assumes it’s free, but it’s wasn’t. Aside from printing non-counterfeitable notes, transporting them in secure transport to branches must have been a significant cost. In my limited time working in a branch, we had cash delivery in the morning, and pickup in the evening to ensure there wasn’t too much on site. There’s the opportunity cost of having to hold a whole bunch of cash to cover expected operations. Multiple staff to handle clients cash transactions, plus the cost to retailers of having to handle cash. It was never free, just hidden. 

My first job was with one of the big four retail banks and there were big costs to handling cash. Doing away with cash also reduces money laundering & tax evasion as it's not so easy to hide digital transactions. 

The real criminals will always find a way to launder money and evade tax, in huge amounts. Making society card only just reduces the chances of the little guy getting a break from the tax man... 

The little guy should pay their taxes as much as anyone else. Tax evasion is wrong whoever it is. 

Morally you are quite right of course Emme, and if the little guy had access to the same tax breaks the big guys did, I would agree, but while multi-millionaires are given the opportunity to reduce their tax bill left right and centre and poor people are not, I am not going after those the bottom of the food chain.

Like I said, the real criminals will still find a way to launder money and evade tax, cashless society or not. 

People on PAYE have to pay their share of tax, so should everyone else. We all.lose out when others cheat the system. 

How many Billionaires do you think are on PAYE 

What they get away with compared to say a window cleaner taking cash only is ridiculous. 

What do they actually get away with though ? I know the statement is made but does it bear scrutiny?

Thats not to say some sort of Wealth Tax isn’t appropriate. 

The real issue remains the gap between the top and bottom earners. 

Your last sentence is bang on the money 

I don't want to turn this in to a political debate for obvious reasons.  But the last sentence really is bang on the money.  In the tax year 1978/79 the bottom 50% of taxpayers contributed around 20% of income tax and the top 10% about 10%.
Whereas in 2023/24, the bottom 50% contributed around 10% of income tax while the top 10% lobbed in 60%. (Of which the top 1% chipped in around 30%.). So, how much more should the well-off pay, just out of interest?

Looking at earnings is where you are going wrong here. Wealth taxes and the argument to tax the rich are not talking about earnings. The top 20-25% wealthiest in the UK do not make their money through earnings. They may make some earnings (likely for tax or legal purposes) but most of it will be their wealth generating more wealth at a rate much greater than earnings can be made. 

The tax wealth not work campaign have made it clear it means all people paying income tax would pay less as they (the ones who make the majority ofbtheir money through earnings) are not the ones it is aimed at. Gone are the times when being a top earner and paying high income tax made you wealthy. That's simply not the case anymore. Those with serious wealth don't get it from earnings.

So to correct the original claim: The real issue remains the gap between the top and bottom wealthiest. 

Isn't the assumption there though that those with a lot of asset (and appreciating assets) aren't paying taxes? In my experience that's far from correct.

I can think of a number of people who would fall into the type of wealth tax you are proposing,  yet they at the same time are saying huge amounts of income tax (amongst others) and always have.

I'm afraid it's not an assumption. There are always exceptions as demonstrated by the patriotic millionaires group, who are one of the sponsors of our paper, but as said those with a £50m+ net worth are a small enough cohort to look at a lot of people individually. There's plenty of research out there already which the paper draws on and brings lots of its own primary research too. Some of them pay what at face value sounds like a lot of money but when taken as a proportion of income from all sources is rarely above the 4% mark. As said at that level of wealth tax effectively becomes optional. 

If I look at those I know with wealth above £50m the above is incorrect. Most have achieved that wealth through work, have paid huge sums of income tax, CGT etc along the way so whilst they may have huge sums now in asset most has been bought through taxed earnings and earnings made on those assets will be taxable.

if there’s loopholes the wealthy are using (one assumes legally) change the tax laws.

Its a bit like the people (Gary’s economics for example) who throw out lazy one liners such as the Duke of Westminster pays no tax where as I was paying 50%, in total tosh.

PS would be love to know how someone only pays 4% on earnings…….

You always know lots of people who happen to be the exception to what the data, evidence and research shows!  

The plural of anecdote is not data. 

Yes as said maybe the amounts sound large but at that level of wealth if you take it as a proportion of total income from all sources it suddenly shows it to be tiny compare to income tax rates. Even if someone pays everything they are supposed to. 

I'm principle changing the law to close loopholes sounds sensible but it’s been tried and failed. The system is so complex those paid to find ways to avoid are mire in number and paid so much more than those paid to close it. The proposal effectively says, take a step back look at society as a whole, look at those at the very top with the most ability to pay but yet are in a majority of cases cases paying proportionally less than someone on 50k salary. Let's find a way to target these people for a bit more (that tbh they won't notice) even though it still doesn't equalise that rate.

Sadly I work in an industry where there are many very rich people (people earning £2m+ per annum some with 100m+ in asset).

those I know pay huge sums of tax, whether you look at that from a total £ or % base. All would be paying higher % of tax on their income than someone on £50k

Over three tax years Rishi Sunak earned £4.766m and paid £1.053m in tax. In that final year, he paid an effective tax rate of 22 per cent on an income of nearly £2m. That's a lower tax rate than a nurse might pay. Not 4% granted but less, as a percentage, than a trainee nurse might pay and it's not 50% either. Yes much of that tax was CGT but then a trainee nurse is unlikely to ever be in that fortunate position. 

Then there's the case of Nadhim Zahawi who tried to get away with the non-payment of capital gains tax due after the sale of shares in YouGov, the polling company Zahawi co-founded. The YouGov shares were held through Balshore Investments, a Gibraltar-registered family trust. The tax bill was £5m. Imagine if he had got away with that. Imagine how many other individuals are actively doing so. Imagine how much those chunks of £5m add up to. Imagine what could be done with those hundreds of millions if not billions.   

So here's a radical idea. Why not ban most, if not all, trusts? Then we can get away from any argument that one particular part of society is being selected against. It would stop "creative" accountants from encouraging individuals to use vehicles that are, in some cases, found to be illegal. Those tax inspectors that have to spend so much time forensically investigating the Zahawi's of the world could focus on ensuring that everyone pays the same level of tax, due at the same time, as everyone else. There might not then be the level of backlog in HMRC dealing with queries, refunds etc etc. Just an idea. 

bobmunro said:

jose said:

Using the example above, which is framed in nicely simple terms you get:

£50,000 income, £7,500 tax, leaves you £42,500 to live on.
£100,000 income, £27,500 tax, leaves you £72,500 to live on.
£1,000,000 income, £435,000 tax, leaves you £565,000 to live on.

So when it comes to paying the bills, the person with a £1,000,000 income has about thirteen times as much more to live on compared with the person with an income of £50,000.

If the person earning £1,000,000 a year was left with five times the income of the £50,000 person to live on, they would get £212,500 to make ends meet, and pay £787,500 tax.

Based on the current tax rates, you would need to earn £380,000 to net that £212,500 - so you are effectively proposing a tax rate of 100% on any earnings above £380k. The impact that would have on the economy is unfathomable.

You are right about a 100% tax on earnings over £380k being unfathomable. Probably because it hasn’t been tried so we don’t know what it would lead to.

Algarveaddick said:

ShootersHillGuru said:

Algarveaddick said:

valleynick66 said:

O-Randy-Hunt said:

valleynick66 said:

O-Randy-Hunt said:

I lose about £50 a week in card fees unfortunately. About £200 a month which would be nice in my pocket but there is nothing I can do about it. I just have to suck it up. It's a shame the card machines have to be so greedy and charge a high percentage on my earnings.

But conversely you would always have paid charges for paying in cash either directly or indirectly. 

You may save on insurance by not having as much cash on the premises and save time by your receipts being automatically credited to your account. You / your staff have less risk of robbery etc. 

We all want to pay the minimum fees naturally but there are mitigations / compensatory points to handling less cash is my observation. 

Unless im being dumb and missing any hidden charges, its never cost me a penny as I'm passing by a bank paying in the cash I get. I also don't have staff. Like I say there is nothing I can do as I can completely see its much easier to just tap a card as a customer. I do it myself at times but also always have a wallet with cash in. I just pick and choose who I pay cash or card with.

It's just annoying someone always wants a cut of your earnings and the card machine i use takes around £10-£15 a day from me.

Most business bank accounts have a fee was my point. 

Depending on the tariff cash may be a separate element. 

If you have managed to avoid that due to volumes you pay cash in so be it. 

As a minimum though cards must save you some modest time in going to the bank and Counting the cash etc. 

So they have that fee whether you use cash or card, and for some people cash is better. That being the case, leave it up to the individual. As I have said before on this thread, I am not advocating that people can't use their card, carry on if you want, but let those that prefer cash (or both options, as is my preference) carry on too. 

As for the time taken banking, if it takes ten minutes and it saves £20, that's a rate of £120 an hour...   

What doesn't save me time is standing behind a bloke in a pub whose watch doesn't work, so then he gets his phone out and is then told "No tap it on the top, not on the front" and then has to put his PIN in because it is his nth transaction, all to pay £4.90 for a pint... 

You could argue I have the same issue with the bloke in front of me fumbling for his wallet. Handing over his £10 note, the bar person walking to the till. Waiting for their colleague to finish. Ringing up the sale,
 Getting the change and walking back to the customer to hand over his change. All for a £4.90 pint

You could. 

Surely the correct thing is, give the barman a £5 note and walk away. The 10p goes in the charity box on the bar.

Anyway the £5 pint is rapidly going the same way as cash.

AndyG said:

bobmunro said:

jose said:

Using the example above, which is framed in nicely simple terms you get:

£50,000 income, £7,500 tax, leaves you £42,500 to live on.
£100,000 income, £27,500 tax, leaves you £72,500 to live on.
£1,000,000 income, £435,000 tax, leaves you £565,000 to live on.

So when it comes to paying the bills, the person with a £1,000,000 income has about thirteen times as much more to live on compared with the person with an income of £50,000.

If the person earning £1,000,000 a year was left with five times the income of the £50,000 person to live on, they would get £212,500 to make ends meet, and pay £787,500 tax.

Based on the current tax rates, you would need to earn £380,000 to net that £212,500 - so you are effectively proposing a tax rate of 100% on any earnings above £380k. The impact that would have on the economy is unfathomable.

Yes but it would fuck the high earners which a lot of people seem to want to do. Wreck the country as long as those greedy few get clobbered lol it’s a race to the bottom 

The figures don't stand up, but the neither do the richest 1or 2% being millions better off after years and years of austerity. I don't think most people want to fuck the high earners, I think they want to see an end to those at the bottom suffering more and more cuts and instead having the richest paying more tax into a system that needs it. 

You use the term greedy few yourself Andy. 

bobmunro said:

The semantic argument about what is income/earnings/wages/payment for laboue etc... is meaningless. Income is 'incomings' for which there is a tax liability.

Now let's look at actual figures as percentages are misleading in my opinion. 

Income £50,000 = tax of £7,500

Income £100,000 = tax of £27,500

Income £1,000,000 = tax of £435,000

This assumes no clever tax avoidance schemes, and anyone on PAYE hasn't got a chance of avoiding tax. So tax as it is due.

So someone earning £1,000,000 (20x that of someone who earns £50k) pays 58x the tax. That seems pretty progressive to me (and you will all know my politics are left of centre).

Let's get on to wealth tax. Let's say I earn £10m pa - I pay tax of approximately £4.5m. I invest a high proportion of that net income in assets (property, art, classic cars, whatever) and when any of those assets are realised I pay CGT if applicable. Why should I then pay an additional wealth tax on my net worth, accumulated from net income?

Your post demonstrates exactly why the semantic argument about income/earnings needs to happen. As for the cohort of people we are talking about the majority of what they make is not under PAYE and therefore your entire example doesn't apply to them.

Of course what you set out is how the system was originally designed to work and did so about 50-70 years ago. It's how it would still work in the real world. But again those with net worth of the scale we are talking about may make some through PAYE but the vast majority is made through other means. Some of this is taxable some of it is not. Much of the other taxable bit is avoidable if they so choose.

To use Rob7Lee's above example someone with a net worth of 100m and makes 1-2m cash income a year that is subject to income tax/ PAYE etc. However on top of that they will be bringing in other cash through the various other means which may or may not be taxed depending on avoidance schemes and offshoring. And further on top of that they will be expecting to make a minimum of 15% a year asset growth on which they pay nothing until they withdraw it. But they are able to and frequently do borrow against this to fund further investments or lifestyle (chartering private jets, buying super yachts etc). The cost of this borrowing can then be offset against future earnings further reducing their tax liability. That's where the 4% comes from. There's also further tricks used by the ultra rich such as selling assets to themselves at a loss from one holding company to another in order to offset future tax liabilities. Musk did this with twitter buying it for 44m then selling to himself at an £11m loss to offset tax liability.

So yes if you only look at the traditional taxable bit of it then yes they do pay much more. But that misses the vast majority of what these people make. The whole point of the wealth tax conversation is to recognise that the inequality in society isn't about that traditional part of earnings but about wealth as a whole. And the wealth tax is the proposed solution to that. 

So, Apple Pay is great isn't it?

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Dugdaleclass said:

Interesting to hear from people who work in the financial services sector and their take. Since the pandemic I have to admit leaving cash in a drawer and relying on cards to pay for anything and everything. In fact the only time I have had to carry cash at all was on a visit to Japan (one of the most advanced technological countries but still a society which prefers the colour of your money when making transactions).

High Street banks are pushing for their customers to take responsibility for their own banking through the use of apps. All well and good for those who prefer the tech...but perhaps not for older customers who often have the more substantial accounts. I still insist on monthly paper statements so I have a record in writing of my transactions. 

The 'cash or card' title of this thread is already moving towards being obsolete given that increasing numbers of people are relying on their phones to pay for everything. Great if this is how you like to spend. So easy and accessible. Not so great if you lose your phone or it's nicked. 

You have to take your hats off to them, they are doing less and less and earning more and more. And people just meekly accept it for the "convenience" of waving a phone at a terminal.  

Have to call this one out.

for the man (or woman) on the street, with a current account waving their phone at a terminal - what exactly is the cost? Nothing additional over cash and still 99% of people pay nothing for their day to day banking.

I thought the merchant paid the bank for the "service"?

As does the merchant to take (bank) cash. Ask most smaller businesses/shops and cash is far less convenient, cost of the banking and the hassle of cashing up, taking to the bank etc.

For the end user, paying by cash or paying by card/phone etc is no different - it’s free to them.

I think many people don’t understand the cost of using cash - it was so common everyone assumes it’s free, but it’s wasn’t. Aside from printing non-counterfeitable notes, transporting them in secure transport to branches must have been a significant cost. In my limited time working in a branch, we had cash delivery in the morning, and pickup in the evening to ensure there wasn’t too much on site. There’s the opportunity cost of having to hold a whole bunch of cash to cover expected operations. Multiple staff to handle clients cash transactions, plus the cost to retailers of having to handle cash. It was never free, just hidden. 

My first job was with one of the big four retail banks and there were big costs to handling cash. Doing away with cash also reduces money laundering & tax evasion as it's not so easy to hide digital transactions. 

The real criminals will always find a way to launder money and evade tax, in huge amounts. Making society card only just reduces the chances of the little guy getting a break from the tax man... 

The little guy should pay their taxes as much as anyone else. Tax evasion is wrong whoever it is. 

Morally you are quite right of course Emme, and if the little guy had access to the same tax breaks the big guys did, I would agree, but while multi-millionaires are given the opportunity to reduce their tax bill left right and centre and poor people are not, I am not going after those the bottom of the food chain.

Like I said, the real criminals will still find a way to launder money and evade tax, cashless society or not. 

People on PAYE have to pay their share of tax, so should everyone else. We all.lose out when others cheat the system. 

How many Billionaires do you think are on PAYE 

What they get away with compared to say a window cleaner taking cash only is ridiculous. 

What do they actually get away with though ? I know the statement is made but does it bear scrutiny?

Thats not to say some sort of Wealth Tax isn’t appropriate. 

The real issue remains the gap between the top and bottom earners. 

Your last sentence is bang on the money 

I don't want to turn this in to a political debate for obvious reasons.  But the last sentence really is bang on the money.  In the tax year 1978/79 the bottom 50% of taxpayers contributed around 20% of income tax and the top 10% about 10%.
Whereas in 2023/24, the bottom 50% contributed around 10% of income tax while the top 10% lobbed in 60%. (Of which the top 1% chipped in around 30%.). So, how much more should the well-off pay, just out of interest?

Looking at earnings is where you are going wrong here. Wealth taxes and the argument to tax the rich are not talking about earnings. The top 20-25% wealthiest in the UK do not make their money through earnings. They may make some earnings (likely for tax or legal purposes) but most of it will be their wealth generating more wealth at a rate much greater than earnings can be made. 

The tax wealth not work campaign have made it clear it means all people paying income tax would pay less as they (the ones who make the majority ofbtheir money through earnings) are not the ones it is aimed at. Gone are the times when being a top earner and paying high income tax made you wealthy. That's simply not the case anymore. Those with serious wealth don't get it from earnings.

So to correct the original claim: The real issue remains the gap between the top and bottom wealthiest. 

Isn't the assumption there though that those with a lot of asset (and appreciating assets) aren't paying taxes? In my experience that's far from correct.

I can think of a number of people who would fall into the type of wealth tax you are proposing,  yet they at the same time are saying huge amounts of income tax (amongst others) and always have.

I'm afraid it's not an assumption. There are always exceptions as demonstrated by the patriotic millionaires group, who are one of the sponsors of our paper, but as said those with a £50m+ net worth are a small enough cohort to look at a lot of people individually. There's plenty of research out there already which the paper draws on and brings lots of its own primary research too. Some of them pay what at face value sounds like a lot of money but when taken as a proportion of income from all sources is rarely above the 4% mark. As said at that level of wealth tax effectively becomes optional. 

If I look at those I know with wealth above £50m the above is incorrect. Most have achieved that wealth through work, have paid huge sums of income tax, CGT etc along the way so whilst they may have huge sums now in asset most has been bought through taxed earnings and earnings made on those assets will be taxable.

if there’s loopholes the wealthy are using (one assumes legally) change the tax laws.

Its a bit like the people (Gary’s economics for example) who throw out lazy one liners such as the Duke of Westminster pays no tax where as I was paying 50%, in total tosh.

PS would be love to know how someone only pays 4% on earnings…….

You always know lots of people who happen to be the exception to what the data, evidence and research shows!  

The plural of anecdote is not data. 

Yes as said maybe the amounts sound large but at that level of wealth if you take it as a proportion of total income from all sources it suddenly shows it to be tiny compare to income tax rates. Even if someone pays everything they are supposed to. 

I'm principle changing the law to close loopholes sounds sensible but it’s been tried and failed. The system is so complex those paid to find ways to avoid are mire in number and paid so much more than those paid to close it. The proposal effectively says, take a step back look at society as a whole, look at those at the very top with the most ability to pay but yet are in a majority of cases cases paying proportionally less than someone on 50k salary. Let's find a way to target these people for a bit more (that tbh they won't notice) even though it still doesn't equalise that rate.

Sadly I work in an industry where there are many very rich people (people earning £2m+ per annum some with 100m+ in asset).

those I know pay huge sums of tax, whether you look at that from a total £ or % base. All would be paying higher % of tax on their income than someone on £50k

Over three tax years Rishi Sunak earned £4.766m and paid £1.053m in tax. In that final year, he paid an effective tax rate of 22 per cent on an income of nearly £2m. That's a lower tax rate than a nurse might pay. Not 4% granted but less, as a percentage, than a trainee nurse might pay and it's not 50% either. Yes much of that tax was CGT but then a trainee nurse is unlikely to ever be in that fortunate position. 

Then there's the case of Nadhim Zahawi who tried to get away with the non-payment of capital gains tax due after the sale of shares in YouGov, the polling company Zahawi co-founded. The YouGov shares were held through Balshore Investments, a Gibraltar-registered family trust. The tax bill was £5m. Imagine if he had got away with that. Imagine how many other individuals are actively doing so. Imagine how much those chunks of £5m add up to. Imagine what could be done with those hundreds of millions if not billions.   

So here's a radical idea. Why not ban most, if not all, trusts? Then we can get away from any argument that one particular part of society is being selected against. It would stop "creative" accountants from encouraging individuals to use vehicles that are, in some cases, found to be illegal. Those tax inspectors that have to spend so much time forensically investigating the Zahawi's of the world could focus on ensuring that everyone pays the same level of tax, due at the same time, as everyone else. There might not then be the level of backlog in HMRC dealing with queries, refunds etc etc. Just an idea. 

Sunak paid the correct amount of tax, part of the reason his overall rate was 22/23% is largely due to a good proportion of that money was a capital gain in the US where CGT is 20% and deducted there. His uk salary was taxed at the 20/40/45% rate as it should be.

anyone who actively try’s to evade tax should receive very high fines in my view, maybe 100%. That’s whether you are a billionaire or the window cleaner!

My window cleaner insists on payments being paid directly into his bank account. He's partaking in the cashless society and one has to assume that, until proven otherwise, he is doing that so he can evidence all of his income. He won't need a creative accountant to hide £5m and he isn't in a position where he can falsely claim for expenses such as £5,822.27  for the electricity supply to his stables. He also doesn't hold a position of public authority where he has the ability to influence decision making. And HMRC doesn't need to spend years going through the tangled web of his tax affairs either. It's far easier to ask a window cleaner to prove how he can afford a £300,000 mortgage on net relevant earnings of £10,000 then it is to trace the connection between umpteen offshore companies and trusts and who the ultimate beneficiaries of those are.   

So why not get rid of trusts altogether or bar say ones for insurance purposes? If ultimately, the tax is currently the same but deferred, whether the assets are in trust or not, then banning them would make the tax system far more manageable and transparent and the country would have a far better idea of what tax they could expect in terms of revenue in any given year. One suspects a lot more tax too since, for the reasons I've suggested, it will be far harder to hide those assets.