New Year, new government (fingers crossed). Yes, it’s election year, so – advance warning – I’ll be straying quite a bit from my original brief of looking at tax consultations to take in looking at the wider field of policy and politics.
And I should explain that over the Christmas break I’ve been compulsively re-watching the boxed set of The West Wing
In the episode “College Kids” (West Wing, Season 4 episode 3) the idea is floated of making bonus payments over £1m non-deductible in calculating companies’ profits for corporation tax and using the resulting tax to make university fees fully deductible against income tax.
Why don’t we do that?
Personally I benefited from four years of free higher education and a maintenance grant and I believe that education is a public good to which every citizen is entitled. If I were in charge I’d abolish student fees, reinstate student grants, and repay everyone who’s had to take out a student loan since they were introduced. Parents and guardians and grandparents and enterprising students should at the very least be able to get an income tax deduction for any student fees they pay. There is, even, a mechanism for getting that done – remember deeds of covenant? Publish a form of words for a new Education Covenant which the donor can sign (to give an audit trail) and then let them claim back (via their self assessment) the tax on every payment they make to an undergraduate student.
About half a million students start full time university undergraduate courses each year. Let’s ignore Scotland for the moment (sorry Scotland) and assume they all pay £9000 a year in fees. That’s 4.5 billion, if I haven’t missed a decimal place. Tax relief on that at 20% would be 900m, yes? Multiply it by three (assuming they all do three year courses – back of an envelope figures) £1.8 bn
How are we going to pay for it?
The West Wing way.
The basic presumption is that earnings of more than a million aren’t really remuneration, rewards for services rendered: they are more akin to a distribution of profits. So why should they be tax deductible for the company that pays them?
There were 11,000 people with incomes over £1m in 2011/12 of whom more than 3000 had incomes of more than £2m.
Call it about 15 billion (11,000 x £1m plus another 3,000 x £1m for the ones with £2m and then round it up by another two for the “more than” element – back of an envelope figures, sorry.)
Corporation tax on 15 billion at 20% would be £3bn and, oh look, we might be able to give some grants to the post-grads too…
Why didn’t they do it in the West Wing? I haven’t got that far yet, but I imagine it was politics.
Why don’t we? We have an election coming up. Let’s put it into the questions we ask candidates.
tiintax 