A lot of very rich people have been complaining about the top rate of tax being 50% and how it stifles investment because they don’t have the money to invest because the tax man is taking it all.

My honest reaction has always been boo hoo. I have absolutely no sympathy.

More to the point, if you look at consumer demand, the government’s tax and spending policies have removed so much money from lower and middle class people that confidence has collapsed. Nobody is buying, and retail recovery will always depend on ordinary consumers. If retail is in the doldrums, there’s no point investing as manufacturers won’t have a market. The problems being global, exports won’t have much of a market either.

So if you do away with the 50% band, the likelihood is hardly a penny will be invested into business. It will exit the economy by being lodged into banks which aren’t lending.

So I had this very silly idea.

Tax relief on business investments, specifically ploughing cash directly into businesses (not playing stocks and shares, or even loans.)

If your marginal rate of income tax is 40% or higher, you get 20% relief on every pound you invest into your business.

Ordinary higher rate tax payers would see it as more income on which they only have to pay basic rate tax (20%). Top rate taxpayers would have a band at de facto 30%.

It would be interesting to see if the top rate taxpayers are willing to put their money where their mouth is.

I also had another idea. Tax all income where it is earned. If you earn it in the US and can prove it was taxed there, you don’t pay tax on it in the UK. If you earn it in the UK, no matter where you are domiciled for tax purposes, it is taxed in the UK.

That would need a revolution in tax of course, and would need coordination between all the countries affected to avoid double taxation, but would do away with tax havens at a stroke.

Those with foreign earnings in lower tax countries and domiciled here for tax purposes would also benefit, but those who currently avoid tax by being domiciled elsewhere might end up more than making up for it.

I’ve been pondering what Christians should do if God makes us rich. More on that another time, because there is much to think about with the balance of being rewarded properly for hard work (which I very much believe in) and looking after those who cannot help themselves due to circumstances outside their own control.

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