25 signatures reached
To: Chancellor of the Exchequer
Savers are Losers. Stop it !
I – Set minimum Savings Interest rate to be (RPI + 1)%
II – Index-link both Savings Capital Value & Saving Interest Taxation
III – Legislate for all Savings Interest to be Tax free
IV – As Alternative, Set minimum rate of Savings Interest to be 5/4 x (RPI +1)%
V – Legislate for a Savings Champion, who will have the duty to keep watch on above changes , and report to Chancellor when they are not, or appear not to be, adhered to.
II – Index-link both Savings Capital Value & Saving Interest Taxation
III – Legislate for all Savings Interest to be Tax free
IV – As Alternative, Set minimum rate of Savings Interest to be 5/4 x (RPI +1)%
V – Legislate for a Savings Champion, who will have the duty to keep watch on above changes , and report to Chancellor when they are not, or appear not to be, adhered to.
Why is this important?
This petition is presented for the purpose of creating a better framework of Interest rates and Taxes, as applied in an inflationary environment to High Street Savers.
In this document the word 'real' is used to indicate that Inflation has been taken into account.
Present Situation
In the past 80 years there has been only one instance of an annual RPI deflation. That was 2009.
A Saver is rarely rewarded with a positive real gain under the present methods of setting interest rates and income taxation. Each year the Saver pays income tax and loses a capital value related to Inflation.
In Good Years, Savers are provided with a real gain, but real Income Tax is at a high rate, usually between 50 and 100%.
Sometimes, Savers pay 100% real Income Tax and a real Capital Tax as well.
In Bad Years, Savers pay real Capital Tax, together with a real Ex-Inflation Tax (excess of inflation over interest) .
The last 12 years have been 'bad' years, except for 2009.
Wealth Transfer
For about the past 12 years Savers have been losing real Capital Value from their Savings due to inflation. These losses are not 'lost for all time and to all', but they are losses of capital value from Savers. This capital value is transferred to Debtors, as capital gain or other forms of value transfer. Essentially, due to the action of inflation Savers find their capital value reduced, while Debtors find their debts reduced.
The conditions for such a Transfer is caused by devaluation of the GB Pound; recognised by;
A) Statutory rate Inflation rate specified to Bank of England as 'monthly' & 'medium term' target,
B) Actual Inflation experienced in the UK while the Bank of England attempts to hold Inflation to the Target.
No Capital Transfer Tax nor Capital Gains tax is paid on such Transfers.
No restitution is paid to Savers for these losses
The ONS has no collected data by which to estimate the total value of transfers of such monies. As a first estimate of total UK Saver's losses caused by the current system of Tax&Inflation we can use annual devaluation of the UK Savers total Capital.
BoE data suggest that UK Savers have about £1200x10^9 in Term Deposits, and about £800x10^9 in Sight Deposits. A total of some £2000x10^9. This capital loses value at the rate of devaluation/inflation. Say an annual loss of value of £20x10^9 for each 1% of Inflation.
To prevent this loss it is suggested that Inflation should be reduced to Zero, or, that Savers should be reimbursed for losses caused by Inflation.
It should be noted that currently most Saver accounts are held by Bank, Building Society, and other organisations, who as a matter of course make the calculations for, Interest paid, and Tax deducted. It appears more logical, therefore, to continue with this system, but make sufficient changes to provide a Saver with a real positive reward, after Tax.
Proposal I
Rarely is the interest paid to Savers, positive after tax and inflation.
We suggest that legislation be enacted to provide a legal minimum savings interest rate. Higher rates will be set by 'market forces'
It is proposed that there be a legal minimum rate of 1% above RPI Inflation.
Proposal II
The volume of Tax raised on Savings Interest is currently excessive because no account is taken of Inflation. A fair income tax on Savings Interest might be based on real income.
It is proposed that an Index-link to both Savings' Capital Value & Interest, is used for Income Tax purposes.
Proposal III
An Income tax based on real income would yield a much smaller volume of tax. Were this tax reduced to zero rate, there would be no cost of collection.
It is proposed that Savings Interest is declared tax-free.
Proposal IV
Were no change to be made to the Taxation System as applied to Saving Interest, it would be appropriate to modify the proposed Legal minimum interest rate for Savings, to allow for this taxation disadvantage. It is proposed that in such conditions the Legal Minimum rate of Savings Interest shall be 125% of the rate proposed above. This will over compensate those who do not pay income tax, and will be an insufficient adjustment of those who pay income tax at the 40 and 45% rates. For the purposes of this Petition we retain a simple flat rate tax concept, set at 20% or 1/5.
It is proposed that the minimum rate of Savings Interest to be 5/4 x (RPI +1)%.
Proposal V
So that the lack of 'fairness' is removed, we have made the proposals above.
Such a situation might return.
We propose that a Treasury position of 'Savings Champion' shall be created by primary legislation.
The specific duty of the Savings Champion will be to keep watch on above changes ( when they have been instituted by legislation) and report to the Chancellor of the Exchequer when they are not, or appear not to be, adhered to.
In this document the word 'real' is used to indicate that Inflation has been taken into account.
Present Situation
In the past 80 years there has been only one instance of an annual RPI deflation. That was 2009.
A Saver is rarely rewarded with a positive real gain under the present methods of setting interest rates and income taxation. Each year the Saver pays income tax and loses a capital value related to Inflation.
In Good Years, Savers are provided with a real gain, but real Income Tax is at a high rate, usually between 50 and 100%.
Sometimes, Savers pay 100% real Income Tax and a real Capital Tax as well.
In Bad Years, Savers pay real Capital Tax, together with a real Ex-Inflation Tax (excess of inflation over interest) .
The last 12 years have been 'bad' years, except for 2009.
Wealth Transfer
For about the past 12 years Savers have been losing real Capital Value from their Savings due to inflation. These losses are not 'lost for all time and to all', but they are losses of capital value from Savers. This capital value is transferred to Debtors, as capital gain or other forms of value transfer. Essentially, due to the action of inflation Savers find their capital value reduced, while Debtors find their debts reduced.
The conditions for such a Transfer is caused by devaluation of the GB Pound; recognised by;
A) Statutory rate Inflation rate specified to Bank of England as 'monthly' & 'medium term' target,
B) Actual Inflation experienced in the UK while the Bank of England attempts to hold Inflation to the Target.
No Capital Transfer Tax nor Capital Gains tax is paid on such Transfers.
No restitution is paid to Savers for these losses
The ONS has no collected data by which to estimate the total value of transfers of such monies. As a first estimate of total UK Saver's losses caused by the current system of Tax&Inflation we can use annual devaluation of the UK Savers total Capital.
BoE data suggest that UK Savers have about £1200x10^9 in Term Deposits, and about £800x10^9 in Sight Deposits. A total of some £2000x10^9. This capital loses value at the rate of devaluation/inflation. Say an annual loss of value of £20x10^9 for each 1% of Inflation.
To prevent this loss it is suggested that Inflation should be reduced to Zero, or, that Savers should be reimbursed for losses caused by Inflation.
It should be noted that currently most Saver accounts are held by Bank, Building Society, and other organisations, who as a matter of course make the calculations for, Interest paid, and Tax deducted. It appears more logical, therefore, to continue with this system, but make sufficient changes to provide a Saver with a real positive reward, after Tax.
Proposal I
Rarely is the interest paid to Savers, positive after tax and inflation.
We suggest that legislation be enacted to provide a legal minimum savings interest rate. Higher rates will be set by 'market forces'
It is proposed that there be a legal minimum rate of 1% above RPI Inflation.
Proposal II
The volume of Tax raised on Savings Interest is currently excessive because no account is taken of Inflation. A fair income tax on Savings Interest might be based on real income.
It is proposed that an Index-link to both Savings' Capital Value & Interest, is used for Income Tax purposes.
Proposal III
An Income tax based on real income would yield a much smaller volume of tax. Were this tax reduced to zero rate, there would be no cost of collection.
It is proposed that Savings Interest is declared tax-free.
Proposal IV
Were no change to be made to the Taxation System as applied to Saving Interest, it would be appropriate to modify the proposed Legal minimum interest rate for Savings, to allow for this taxation disadvantage. It is proposed that in such conditions the Legal Minimum rate of Savings Interest shall be 125% of the rate proposed above. This will over compensate those who do not pay income tax, and will be an insufficient adjustment of those who pay income tax at the 40 and 45% rates. For the purposes of this Petition we retain a simple flat rate tax concept, set at 20% or 1/5.
It is proposed that the minimum rate of Savings Interest to be 5/4 x (RPI +1)%.
Proposal V
So that the lack of 'fairness' is removed, we have made the proposals above.
Such a situation might return.
We propose that a Treasury position of 'Savings Champion' shall be created by primary legislation.
The specific duty of the Savings Champion will be to keep watch on above changes ( when they have been instituted by legislation) and report to the Chancellor of the Exchequer when they are not, or appear not to be, adhered to.
