Great Financial Ideas Newsletter - February 2014

You are receiving this message because you are registered on our database as a client or contact. If you no longer wish to receive information from Parker Chartered Accountants + Financial Advisors you can unsubscribe at any time.


It sounds odd doesn’t it, pay less tax and yet increase the overall amount of tax collected. Well this concept is well known in economics and is known as the “trickle-down effect”. The idea is that economic policies that help the wealthy then trickle down to everyone else. As business is the only real driver of the economy, because this actually creates employment that generates growth, helps business and you help everyone.

By reducing taxes for business and the people who run them everyone else in the economy benefits indirectly. The reason is the extra income not spent on taxes is used to invest in the business through increased employment or capital spending. New workers mean new wages to spend money in the economy and also pay more taxes. Also additional savings can then be used by banks for additional lending. All of this goes to increase economic growth.

In January HMRC issued a consultative document aiming to increase their powers to collect tax from the very people who create the growth. This is counterproductive for a number of reasons

  1. As I have noted above, such people can then use the money to invest and thus create more growth. Even if they spend the money on their own consumption the money still gets spent thus growing the economy. The trickle-down effect means the increased growth ultimately leads to higher tax take.
  2. Higher taxes demotivates by removing the point of working hard. People either work less or move to a jurisdiction where taxes are lower and they get to keep more of the money they earn. Either way the country or the exchequer loses out.
  3. Higher taxes push tax avoidance, which is legal, towards tax evasion which is illegal. Our tax system now works on self-assessment. The tax payer tells HMRC how much tax they owe and they dutifully pay it on the due date. If the system is deemed to be unfair the goodwill required to make the system work will break down. Have you ever wondered why it is so difficult to pay for anything other than in cash in Italy?
  4. The consultative document actually goes further in that HMRC would like to make themselves judges in their own courts, thus diluting the taxpayer’s right of appeal and allowing HMRC to be both judge and jury. Personally I cannot see this draft getting through to legislation but it is outrageous that they should even consider it reasonable to propose such a solution
We will be writing to our local MP about HMRC’s consultation and it will no doubt be touched on in future blogs. In spite of all of HMRC’s efforts there is still a good deal of legitimate tax avoidance planning available. If you wish to know more about paying less tax we can help.

Andy Parker
Chartered Accountant, Solihull

Share your experiences
Add your own comments to any of the blogs that really strike a chord via the Parker website.

If you feel like you’re suffering an overload of information, especially from the mainstream news media maybe it’s time to stop and take stock. An overdose of news can be bad for you. Read more...
Saving on inheritance tax is only one reason to consider sheltering your wealth in a trust. Keeping your money safe for your family is often a much more compelling reason. Follow these three simple rules of estate planning for security and peace of mind. Read more...
The majority of people I speak to do seem to acknowledge that they need to save for their retirement. Their commitment to doing so, however, is less certain. Whilst some might think the new pension auto enrolment scheme will provide a solution, we’re not so sure. Read more...
The start of a new year is a really good opportunity to think about the issues of data security in your business and make some changes to your regular information security practices. Here are some simple actions you can take now. Read more...
Seminar Programme
Our planned seminars in February and March will now take place later in the year. In the meantime, if you would like more information on Pension Planning for Company Owners & High Flying Executives or Tax Efficient Profit Extraction call 0121 704 1354.
For advice on all accountancy and financial issues contact Parker Chartered Accountants and Financial Advisors on 0121 704 1354.


Andy Parker
Parker Chartered Accountants + Financial Advisors

If you wish to unsubscribe from this email please click here