The UK government could slow down immigration without breaking EU rules.
Chartered accountant Philip Shirley claims a simple tweak of the Pay As You Earn tax system would discourage EU citizens from taking low paid jobs in Britain.
A new deal on personal tax allowances would close a loophole that allows citizens of other EU countries to work in Britain without paying income tax.
The founder of the London tax accountancy firm P.E. Shirley says cutting PAYE personal allowances would cut immigration without denying ‘freedom of movement’, one of the ‘four freedoms’ that must be honoured by all states trading in goods or services in the Single Market.
Leaving the Single Market after declaring Brexit would cost the UK £75 billion according to the Insitute for Fiscal Studies – £2,900 for every one of 26 million households.
Writing for the InFacts information network, Shirley says:
The government has been committed to helping the poor and it has done so by encouraging the poor to work rather than live on welfare. However, in helping the poor to earn, the government has made the UK labour market more attractive to foreigners.
A central plank of Conservative policy has been to take people out of tax. The personal allowance has been raised from £6,475 in 2008/09 to £11,000 in the current year.
Non-UK residents, who are citizens of EEA states, are entitled to a personal allowance and this allows residents in other EU countries to work temporarily in the UK without paying tax.
This goes further than other EU states and the government would be entitled to remove the personal allowance from non-UK residents.
New residents in Britain would lose their personal tax allowances.
The government could go further and remove the personal allowance for new residents in the UK for a period of time.
For example, a person who comes in the UK would not receive a personal allowance for say five years.
Those who have left the UK and are returning to the UK could be entitled to the personal allowance if they have been resident in the UK for five years at some earlier time.
This would not prevent a person from coming to the UK, but it would mean that he would pay UK tax at a minimum of 20% on all his earnings and reduce the incentive for him to come.
Somebody earning £10,000 would pay tax of £2,000 and have take home pay (ignoring national insurance contributions) of £8,000. The relative impact of the abolition diminishes the more a person earns and has no impact on those earning so much that they do not get the personal allowance.
Such a change would be fairly easy to administer through the tax system. It would not prevent foreign workers from coming to the UK, but would have an economic impact on what they earn from the UK.
It would favour low earning UK people who are being priced out of jobs by foreigners.
Shirley says the UK would not even need to leave the European Union to make the change: ‘Tax is a UK matter and not an EU matter’.
This would not prevent a person from coming to the UK, but it would mean that he would pay UK tax at a minimum of 20% on all his earnings and reduce the incentive for him to come.
Somebody earning £10,000 would pay tax of £2,000 and have take home pay (ignoring national insurance contributions) of £8,000. The relative impact of the abolition diminishes the more a person earns and has no impact on those earning so much that they do not get the personal allowance.
Such a change would be fairly easy to administer through the tax system. It would not prevent foreign workers from coming to the UK, but would have an economic impact on what they earn from the UK. It would favour low earning UK people who are being priced out of jobs by foreigners.
Picture: PE Shirley Ltd