A useful little example of the Laffer Curve in action here – Sir Jim Ratcliffe, of Ineos, is suggesting that he’ll leave the country thereby saving himself up to £4 billion tax.
Ya, boo, sucks! of course, how dare the rich not pay their fair share? Except, again of course, there are at least two definitions of fair to consider here. What we think it is fair they pay and what they think it fair they pay. The two often enough coming into a teeniest little conflict.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] A prominent Brexiteer and Britain’s richest man, Sir Jim Ratcliffe, is set to quit the United Kingdom in a bid to save billions in tax, it has been reported. The 66-year-old, who was knighted less than a year ago for his services to business and investment, is reportedly planning to save up to £4bn with a move to Monaco. The country – famous for its yacht-lined harbour, upscale casinos and the prestigious Grand Prix motor race – is a well-known tax haven. And Ratcliffe has been working with PwC on a tax avoidance plan, which could also benefit two senior executives at his chemicals company Ineos. [/perfectpullquote]
This is just that Laffer Curve in action of course. The statement being that a tax rate can be too high to maximise revenue just as it can be too low to do so. And here we’ve a nice example, demanding £4 billion from Sir Jim seems to be too high a rate as instead of getting it the Treasury will get nothing. We’re over the revenue maximising rate in this specific example. We’d get more with a less confiscatory tax rate.
There’s much more to the Laffer Curve than just this, we can talk about growth rates, incentives and all the rest. But we do still come back to this basic idea. What we think they should pay might well not be what they think they should. Which makes it a little difficult to determines what’s a fair share, doesn’t it?