In other words, if somebody puts ?100 into a pension fund from their net income, they would have between ?30 and ?43 added by the Treasury depending on exactly how the system worked.
Despite the rhetoric,
cheap jordans for sale, this is not a form of tax relief: it is a system of arbitrary subsidy.
The touted 30 per cent is not a tax rate paid by any UK taxpayers. Currently, pension fund tax relief is one of many aspects of the UK tax code (the existence of ISAs is another) that push our tax system in the direction of taxing expenditure rather than earnings – something of which many economists approve. A so-called tax relief of 30 per cent would simply be an arbitrary subsidy for pensions saving.
It is because this move would detach the taxation of pensions from any economic principles that its implementation would become incredibly complex in practice.
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Employer pension contributions will have to be treated as benefits in kind and taxed at 20 per cent or 40 per cent before the 30 per cent subsidy is then added. This will be complicated for everybody,http://mateuszdg.tvtom.pl/forum/viewthread.php?thread_id=161801cheapjordanshoesfreeshipping.com/bolg,
jordans for cheap, but virtually impossible to administer in the case of defined benefit schemes. This will mainly affect public sector workers.
Higher rate tax payers may end up paying tax at 40 per cent tax on their earnings, making a pension contribution that will receive a 30 per cent top up and then be taxed at 40 per cent again on the pension they receive. If they are members of defined benefit schemes, they may have little choice in the matter. So, some people will, in effect, be ‘fined’ for making pension contributions.
 ,
cheap jordans free shipping;
And a basic rate taxpayer, under the new pension freedom rules,
cheap jordans, would be able to make a pension contribution, receive a 30 per cent subsidy and then immediately withdraw the money whilst paying tax at just 20 per cent.
Thousands of paragraphs will therefore have to be added to the tax code to deal with the potential abuses and anomalies.
Many people support change on two grounds. The first is that most of the tax relief goes to higher-rate taxpayers.
Of course, that is not surprising; most tax is paid by higher-rate taxpayers. Furthermore, it makes sense,
jordan shoes, for many reasons, for people to make higher pension contributions later in life when they are more likely to be paying tax at 40 per cent.
Not only that,
cheap jordans online, other tax-free savings vehicles are more suitable for basic-rate taxpayers.
People also complain that individuals receive tax relief at 40 per cent and then only pay tax at 20 per cent when they retire. In fact, this is good.
It counteracts one of the unfortunate features of progressive tax systems - they penalise people on volatile earnings.
There are alternative reforms available to the Chancellor; alternatives that could make him the toast of generations of public finance economists to come. He could scrap tax relief altogether. More realistically, pension fund tax relief could be replaced by an ISA-style arrangement whereby contributions are made from net income and so that withdrawals can then be made tax free.
Alternatively, the current system could be kept and the anomalous tax-free cash lump sum abolished or severely restricted so it no longer affects decisions at the margin.
This strange feature of the UK tax system allows contributors to sidestep the tax system completely – there is tax relief on contributions and then no tax paid on that part of the fund (25 per cent) that can be taken as straight cash,http://www13.plala.or.jp/white_roots/gwbbs/gwbbs.cgicheapjordanshoesfreeshipping.com/bolg. This is absurd.
Keeping the current system in principle but limiting tax-free cash to ?25,000 would enable the Treasury to tear up pages of tax legislation designed to prevent abuse of pension fund tax relief because abuse would no longer be worthwhile. As it happens, this would also reduce hugely the benefits that flow to the rich from tax relief.
That would be the policy of a reforming Chancellor who understood public finance and who did not believe that political manoeuvring should determine his every action.
Philip Booth is research director at the Institute of Economic Affairs and Professor of Finance,http://users.atw.hu/conflux-mg/index.php?site=forum_topic&topic=17366cheapjordanshoesfreeshipping.com/bolg, Public Policy and Ethics at St. Mary’s University, Twickenham
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