B1370 - Finance Bill 2018 (Second Reading)

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DayneD89
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B1370 - Finance Bill 2018 (Second Reading), TSR Government

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Finance Bill 2018
An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.

BE IT ENACTED by The Queen's most Excellent Majesty, by and with the advice and consent of the Commons in this present Parliament assembled, in accordance with the provisions of the Parliament Acts 1911 and 1949, and by the authority of the same, as follows:-

1. Income Tax
(1) There shall be a Personal Allowance of £10,165.60.
(2) The Working Rate, charged on additional earnings up to £9,834.40 above the Personal Allowance, shall be set at 15%.
(3) The Basic Rate, charged on additional earnings up to £30,000 above the Working Rate, shall be set at 20%.
(4) The Higher Rate, charged on additional earnings up to £100,000 above the Basic Rate, shall be set at 40%.
(5) The Additional Rate, charged on any additional earnings above the Higher Rate, shall be set at 45%.

2. Corporation Tax
(1) The Corporation Tax Reform Bill 2016 is hereby repealed.
(2) Corporation Tax shall be set at 19%.

3. Value Added Tax
(1) The Standard Rate shall be set at 17.5%.
(2) Pubs shall be exempt from Value Added Tax.

4. Pension Fund
(1) The National Insurance (Primary Threshold Reform) Bill 2017 is hereby repealed.
(2) National Insurance shall hereby be known as the Pension Fund.
(3) There shall be a Personal Allowance of £10,165.60.
(4) Category A, H and M contributions, charged on earnings up to £36,521.60 above the Personal Allowance, shall be set at 9%.
(5) Category A, H and M contributions, charged on any additional earnings above £50,000, shall be set at 2%.

5. Commencement, Short Title, Extent and Conditions
(1) This bill may be cited as the Finance Act 2018.
(2) This bill shall extend to the United Kingdom.
(3) This bill shall come into force on April 1, 2019.

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Notes

This government believes we must send a message to the rest of the world that we are open. Many have called Brexit a cliff-edge, where we will descend into a national decline. We believe that will only be the case if the government adopts a similarly pessimistic stance. To this end, we will reform Corporation Tax by returning to a flat rate alongside tax relief for small businesses. Under the new system, businesses due to pay under £10,000 will be exempt from paying tax and businesses due to pay between £10,001 and £50,000 will be able to pay half the flat rate.

Another measure to pursue a country where people’s work is rewarded more effectively is by reforming National Insurance into a Pension Fund. National Insurance has failed to fulfill its purpose, instead being used to raise taxes by stealth. The Pension Fund will be used solely for state pensions. To fund National Insurance’s replacement with a Pension Fund, the Personal Allowance for both will be set at £10,165.60.

The aforementioned changes allow cuts to Income Tax for the working class to become feasible. Before the merge with National Insurance is accounted for, a Working Rate of 15% will be created for those earning up to £20,000 per year. The Basic Rate will cover those earning between £20,001 and £50,000 and the Higher Rate will cover those earning between £50,001 and £140,000.

Moving on from the big three taxes, Value Added Tax has been addressed by this government as a cause for concern. Ultimately, it is a tax that undermines the progressive nature of Income Tax by hitting the poorest in society the hardest. To challenge this reality, pubs will be made exempt from Value Added Tax and the Standard Rate will be reduced from 20% to 17.5%.

Changes for Second Reading

- The Basic Rate now covers those earning between £140,000 and £150,000 a year, as is the case in real life.
- Corporation Tax has been tapered to ensure it does not disincentivise small businesses from growing.
- References to Land Value Tax and Inheritance Tax have been removed from the Finance Bill, to be presented in separate bills.

Calculations

Income Tax Changes: £15.1 billion
Corporation Tax Changes: £5.2 billion
Value Added Tax Changes: -£18.1 billion
Value Added Tax Exemptions: -£3.6 billion
B1262 Repeal: -£5.5 billion
Pension Fund: -£11.1 billion

Total cost: -£18 billion (not adjusted for projected changes to the economy’s performance)

Sources

[1] Autumn Budget 2017
[2] Income Tax
[3] Corporation Tax and Pension Fund
[4] Corporation Tax Reform Bill 2016
[5] Value Added Tax Exemptions
[6] National Insurance (Primary Threshold Reform) Bill 2017

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Jammy Duel
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Costing remains off by a country mile

I would also like to ask what 18/6 is because it sure as hell isn't 3.6
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LibertarianMP
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aye
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Jammy Duel
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Had another run through the figures again and Income Tax changes would cost about 22bn, not raise 15
VAT Exemtions would cost £3bn and not £3.6
The VAT changes are also thrown off because the VAT on the £15bn (before VAT) taken by pubs is counted twice so is actually only £17.75bn
B1262 repeal does not cost that much because it isn't fully in force, this financial year it costs about £3bn relative to RL
I make it that the NI changes cost £12bn relative to RL, £3bn is already canon meaning it costs £9bn and not 11.1bn
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Connor27
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I think that this rolled back version is much more amenable for much of the house and I hope it receives backing.
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Jammy Duel
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(Original post by Connor27)
I think that this rolled back version is much more amenable for much of the house and I hope it receives backing.
Thing is it explodes the deficit even if the more controversial bits have been cut.
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Mr T 999
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The second reading is much better and I do like the tax cuts. I want to support this although I am very concerned about the increase in deficit so I'm going to abstain for now.
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Rakas21
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Mr Speaker, i am pleased to see that the Chancellor has listened to the House in rolling back the scope of his previous bill and for that he is to be commended.

Although i would like to see Jammy walk us through the evidenced working of his claim on some inaccuracies my only real concern with this bill is the increased deficit resulting. If however the Chancellor can amend some of the thresholds in this bill to ensure only a single digit rise in the deficit, i would be prepared to vote for this.

My recommendation is that the changes come from Income Tax to get back the revenue needed.
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Jammy Duel
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(Original post by Rakas21)
Mr Speaker, i am pleased to see that the Chancellor has listened to the House in rolling back the scope of his previous bill and for that he is to be commended.

Although i would like to see Jammy walk us through the evidenced working of his claim on some inaccuracies my only real concern with this bill is the increased deficit resulting. If however the Chancellor can amend some of the thresholds in this bill to ensure only a single digit rise in the deficit, i would be prepared to vote for this.

My recommendation is that the changes come from Income Tax to get back the revenue needed.
The VAT related things are trivialities, to get the VAT from pubs the chancellor took the revenue and divided by 5 rather than 6, as described the 20% to 17.5% did not factor in this £3bn.

The rest is based of off some spreadsheets I made a couple of weeks back to estimate NI and Income Tax using historic data to refine it and account for modelling inaccuracies, for instance the NI was consistently overstated by about 6% give or take and the IT understated by a similar amount.

Based on those spreadsheets I get income tax of £169.9bn which is reduced to £166bn if the personal allowance is not removed for high earners as is the case IRL, this is as opposed to £185bn projected by the OBR for 2018/19.

Going through the same with NI, including factoring in pensioners and the self employed, I come out with a NI figure of £123.1bn vs £134bn from the OBR.

For the cost of B1262 I just changed the NI Primary Threshold to £8998 which is the effective annual rate for FY2018/19 in my RL 2018/19 spreadsheet.

My figures in the first post don't agree with the ones here which is something to look into (I'll run back over it tomorrow) but regardless, all the major policies are expensive and the deficit is looking at doubling without LVT providing in excess of £100bn to offset these cuts.

It is also worth noting that my information is based off actual income data published by the ONS and adjusted for wage growth with the data being on a percentile basis with an accurate number of workers, as opposed to the chancellor's figures which had income levels illogically distributed with absurd populations that came to a total working population in excess of 50 million people.
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Jammy Duel
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(Original post by Rakas21)
Mr Speaker, i am pleased to see that the Chancellor has listened to the House in rolling back the scope of his previous bill and for that he is to be commended.

Although i would like to see Jammy walk us through the evidenced working of his claim on some inaccuracies my only real concern with this bill is the increased deficit resulting. If however the Chancellor can amend some of the thresholds in this bill to ensure only a single digit rise in the deficit, i would be prepared to vote for this.

My recommendation is that the changes come from Income Tax to get back the revenue needed.
A way to see both measures cost is simple enough. For NI it's a triviality, fewer payers and at a lower rate.

For income tax consider this: the lowering of the personal allowance causes an increase of up to about £250 for the working poor, this would be the approximate bill at the RL PA. This will shift to equality in the high 16k area which, ignoring your stagflationary act and looking purely at RL, is roughly what you expect from full time minimum wage . Then we get a bit over £3k to take us to the basic rate threshold, this means a tax cut of about £150 for almost every worker which more than offsets the extra take on high end part timers.

We then have the higher rate increase being accelerated and is nearly £4000 higher than RL meaning another ~£800 per higher rate taxpayer cost.

Next we get that there is no indication that the removal for high earners will be retained which means an effective £4000+ tax cut for the top couple of percent.

It is clear that the income tax changes will cost a large amount of money when considered this way.
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username1899909
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I'll repeat what i said in the budget and on the first reading of the finance bill. the tax measures i welcome and the NHIS proposal is a step forward and compromise between having a universal healthcare system and private healthcare providers. I also expressed my opposition to the Land value tax for reasons i stated in the budget thread.
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Jammy Duel
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(Original post by Hazzer1998)
I'll repeat what i said in the budget and on the first reading of the finance bill. the tax measures i welcome and the NHIS proposal is a step forward and compromise between having a universal healthcare system and private healthcare providers. I also expressed my opposition to the Land value tax for reasons i stated in the budget thread.
Why are you commenting on a load of things that aren't even in the bill?
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Dafios9128
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No
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Jammy Duel
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CatusStarbright With the resignation of Saunders who is the new person responsible for ignoring my pointing out of errors (for the third time) in the costing of the bill/budget?
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CatusStarbright
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(Original post by Jammy Duel)
CatusStarbright With the resignation of Saunders who is the new person responsible for ignoring my pointing out of errors (for the third time) in the costing of the bill/budget?
I am currently in the middle of getting my ducks in a row. Expect a small Cabinet re-shuffle shortly.
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DayneD89
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This has gone to cessation

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DayneD89
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This has gone to a new reading

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