Friday 15 December 2017

Plain example of a ridiculous tax

Eddie Hobbs

Mr Justice Kelly may be doing some service in announcing his early retirement by providing a classic example of the consequences of poorly conceived wealth tax: in this case the application of top rate tax, twice over on the same money. Every day he turns up to run the High Court Commercial List, he's paying 52 per cent tax on most of his earnings and over 70 per cent on his accruing pension if, as I suspect, Mr Kelly has exceeded his fund threshold.

Any wealth tax due on public sector pensions doesn't have to be paid up-front like the rest of us, but can be spread out over 20 years and is written off if you die in the meantime – that's interest-free loans to pay your pension wealth tax with free life insurance – a classic from Hangar 51! Mr Justice Kelly is perfectly correct to call it a day. The question is whether policymakers get it yet, that the model is a pig's breakfast. Had the intention been to limit tax relief then lifetime limits on total inflows, both real and notional, from both members and employers would have been preferable, together with the reconstruction of public sector pensions.

We are instead left with the economically daft imposition of a ceiling, causing pension capital to start jamming on the brakes, de-risking investment by switching from risk-taking business investment to safe havens and causing vital human resources like Mr Justice Kelly to be lost to the High Court. He won't be the last.

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