Why is it that those who live off financial speculation are taxed so much less in the UK than those who work for a living?

Callistemon21

I thought we were discussing those who play the stock markets, dabbe in foreign exchange, speculate to accumulate rather than investors?

If we pay/paid into a firm's pension scheme , paid AVCs, had an endowment or an ISA etc we are all investors at some point.

Yes. There is a world of difference between investing both for potential gain or because you believe in the company, and the type of financial activity carried out by the vastly wealthy, whose ability to move money to more advantageous harbours like countries whose tax regime suits them or off shore ports.

These people give nothing back to society.

I’m just beginning Oliver Bullough’s book about the U.K. and the ultra wealthy.

There has been a deliberate policy since perhaps the 70s for the U.K. to help the oligarchs, kleptocrats and criminal as well as all wealthy folk to avoid as much tax as possible. What we are seeing now with the vast corruption taking place is a result of this policy.

I thought we were discussing those who play the stock markets, dabbe in foreign exchange, speculate to accumulate rather than investors?

If we pay/paid into a firm's pension scheme , paid AVCs, had an endowment or an ISA etc we are all investors at some point.

The very wealthy often know no more about investing etc. They pay someone who does to work for them.

If you are a person who understands the world of finance & investment then the legal ways to pay the least in tax etc..will be well known. For many, including me, who earned a sufficient income and had little, if any, extra money after bills were paid speculative investment was not something on the radar & consequently I know zilch about it.
A relative, who worked in HMRC, has all kinds of pockets of money & property but as they get older it seems more of a stress than a benefit as they appear obsessed with how to dispose of their stash without someone paying tax on it!

Actually, on looking at that again, they’re not daft are they?

Using Maizie first post example, it’s cheaper for them to pay voluntary contributions @ £800pa for 35 years to qualify for SP than fork out around £2500pa in NI if the rules don’t change!

If they spend a lifetime ‘earning’ their money in this way and the rules remain the same Dinahmo the benefit of not paying NI will result in no State Pension....£10,000 a year they’re losing!

I cannot see what the problem is as long as they are paying their taxes.

In which case you seem to have missed the whole point of this thread. Try reading the OP again.

My problem with this,, in the circumstances that I outline earlier, is that they aren't paying any NIC. In my scenario they are using, quite legally, the allowances and exemptions available to them. The fact remains that people whose income is derived from investments and/or lettings, whilst they may be paying the correct amount of income tax are not paying NIC. In my book this is unfair to whole those who are working and paying the contributions. And I am not suggesting that people of retirement should pay.

If I earn £50k pa why does it matter how I earned it as long as it was earned legitimately? Why do we tax the same income differently? If we do that maybe we should reduce tax for jobs that are difficult to recruit to?

GrannyGravy13 Sun 03-Apr-22 17:16:17
I cannot see what the problem is as long as they are paying their taxes.

I'm not exactly sure what you are saying GrannyGravy re the above. Are you suggesting that they do this for a company and are paid a wage? Or are you suggesting that they are doing this for themselves as a business?

As I said at the beginning of the thread it’s the big boys/girls who know how to get around the system, the billionaires, they should be the ones that HMRC should be investigating.

I'm not sure how this is relevant. The system I suggested should be far less complex than the current one. If these people were making a return on all and every source of income, they would be added up and taxed at a rate equal to someone working and being paid an income by an employer. Where is the problem, exactly? As you have repeated this I feel I may not have answered it.

DaisyAnne for some speculating in the stock market is work, and income from that is their wages.

I cannot see what the problem is as long as they are paying their taxes.

As I said at the beginning of the thread it’s the big boys/girls who know how to get round the system, the billionaires, they should be the ones that HMRC should be investigating.

I appreciate that some of the billionaire entrepreneurs and company owners employ many people, but that should not be an excuse to not pay any taxes due.

I feel the same about billionaire accountants who assist in tax evasion, which is currently awash with loopholes.

GrannyGravy13

MaizieD it depends on the definition of work though.

For some it’s singing at a local pub, for some it’s cooking, for some it’s driving, teaching, healing people, for others it playing the markets and investing.

There is no set idea of work/workplace in a free society, there is the freedom to choose for the majority of citizens.

"Work" in this instance is the sale of your labour. Why do you need to redifine this? I can't see the problem. In what way does the workplace matter? Why does the type of work matter? If you are selling your time, effort and (hopefully) knowledge it is work, surely?

To be clear, you asked about speculating GrannyGravy - not investment. Investment is a horse of a very different colour. However, it does help us to understand.

Rather as Maizie said, speculation diverts resources away from production and can damage the rest of the economy. It distorts the truth about real supply and demand, possibly causing crashes (as we have seen) and affecting a country's economic balance.

On the other hand, we need to ensure investment is structured so it doesn't encourage the loss of homegrown businesses overseas when they are just reaping the benefits of that investment.

However, this thread is about income from labour and income from other sources. IMO investment can be a good thing if it doesn't distort the reward for the investment by our labour.

GrannyGravy13

MaizieD it depends on the definition of work though.

For some it’s singing at a local pub, for some it’s cooking, for some it’s driving, teaching, healing people, for others it playing the markets and investing.

There is no set idea of work/workplace in a free society, there is the freedom to choose for the majority of citizens.

HMRC manages to differentiate between paid work and income from other sources in most cases.

Most people (including businesses) operate in and pay tax in and according to the regulatory environment of the country in which they are domiciled. .

But the billionaires and ultra wealthy can invest and make money by buying and selling currency and choose where they do so and if and where they pay tax. There is no control over the way vast quantities of money are moved around.

That is why recession, war and pestilence will never affect them.

MaizieD it depends on the definition of work though.

For some it’s singing at a local pub, for some it’s cooking, for some it’s driving, teaching, healing people, for others it playing the markets and investing.

There is no set idea of work/workplace in a free society, there is the freedom to choose for the majority of citizens.

Ah, ok.

I've never been that brave.

People who play the stock market aren't 'investing' in anything. They are usually buying and selling shares which are completely divorced from their original purpose of providing capital for a business.

We are talking here about individuals who play the market for income, not pension funds or investment companies, their taxation is different. Investment companies pay corporation tax, with all sorts of exemptions. I assume that pension funds do the same.

Taxing personal income should be equitable. There is no compelling reason why people who go out to work to earn their living should be taxed more highly than people who get income from other sources.

GrannyGravy13

Playing devil’s advocate why is earning one’s living by speculating on shares, money markets etc so wrong?

If that’s how they choose to earn their living and they are happy with the risk element, and remember profits are lost just not made.

As long as the due tax is paid, they are not committing a crime.

If people, firms, pension funds didn't invest businesses would founder.

You could do exceptionally well or you could lose it all, generally a more risky way of earning a living.

I wonder just how many people under retirement age make their living this way?

Look at where your pension/s and ISA’s are invested before cutting off one’s nose to spite one’s face.
If share dividends were taxed more then pensions would suffer ultimately.

Playing devil’s advocate why is earning one’s living by speculating on shares, money markets etc so wrong?

If that’s how they choose to earn their living and they are happy with the risk element, and remember profits are lost just not made.

As long as the due tax is paid, they are not committing a crime.

So do I.

Well that would empty our current parliament Maizie but he certainly has a point.

And we come back to the "Common Good" that I wish we could vote for

Seems reasonable to me, DaisyAnne.

Adam Smith called those who lived on income from speculation, inherited wealth, who didn't actually work for a living, 'rentiers' and said they should not be allowed to sit in parliament because they had no interest in promoting the wealth of the nation, just in accumulating more for themselves, so would legislate solely in their own interests. I think he had that about right and that is why we see the tax system today skewed in favour of rentiers rather than workers.

Those who make their money solely by manipulating the stock market and the financial markets, though they might work hard at it, don't contribute to the general 'good' of the nation.They're not entrepreneurs, they create nothing, they contribute no skills. Why should they be treated preferentially?

DaisyAnne There is nothing wrong with equality in the tax system.

I get the impression that some on here are quite happy with the current regime.