What with avoidance techniques, the fact that most of the large bonuses go back to the state anyway (income tax, NI, VAT on goods and services bought with the bonus), and banks/bankers upping sticks to less hostile countries.. it wouldn't surprise me if this ridiculous tax was either revenue neutral or in fact actually lost the government money.
This is an excellent point that is generally lost in all the fun and scapegoating. To expand on it a little, consider the following for the kind of people we are talking about in 2011:
1. They will lose their personal allowance.
2. They will pay income tax of 50% on their bonuses.
3. They will pay NI of 1% on their bonuses.
4. Their employer will pay Employer NI of 12.8% on these bonuses - this is due to rise to 13.3% in the following year.
When one considers all of the above, it is clear that HMRC will benefit much more from these bonuses than the recipients:
An employer wishes to pay an obscene bonus to one of his useless, no-good, scumbag bankers, who are rolling in money whilst deliberately grinding the faces of the poor into the dirt. For every £100 of bonus:
1. The employer must pay NI of £12.80, raising the cost to £112.80.
2. The recipient must pay NI of £1.
3. The recipient must pay income tax of £50.
4. Of the total cost of the bonus to the employer, the recipient receives £49 (43.4%).
5. Of the total cost of the bonus to the employer, HMRC receives £63.8 (56.6%).
As well as losing their personal allowances (a major breach of a very important principle that people should be treated the same at any given point on the earnings scale) they will also not receive the correct amount of tax relief on pension contributions (ie, an amount related to the income tax they have paid on that portion of their income contributed to a pension). They also face the freezing (for
five years) of the Lifetime Allowance.
Tax-effiecient schemes such as VCTs and EISs have, in this context, low annual investment limits if one wishes to benefit from tax relief.
All of this leaves aside any taxes they must pay if they wish to use their bonues to buy anything. It also leaves aside the detrimental effect, for both the eceonomy and HMRC, of lower spending.
As Virtuos0 also points out, it also assumes that these people and companies will be content to stay in Britain getting f***** in the 4r$e.
You say that it may well end up being revenue neutral, or actually costing the country money. Of course, but that perhaps misses the real point.
"Taxing the rich" is not about raising revenue - it never is, because it always fails, and always will fail. Any initial growth in revenue is quickly negated. If loopholes are closed too aggressively, people leave (that is why sensible Governments always leave viable loopholes which, when closed, are replaced by others). The economy suffers and everyone is poorer as a result.
Punitive taxes are political, pure and simple. They always end up hurting the poor (whom they are supposed to benefit) rather than the direct and immediately obvious victims of such taxes.
