Former Magic Circle man Dan Neidle highlights ‘odd’ rates discrepancy between lawyers and bankers
A former Magic Circle tax partner has argued that City partners should pay more tax.
The post, which appears on the website of Neidle’s non-profit organisation Tax Policy Associates, highlights that lawyers have an overall effective tax rate of 47%, whilst the bankers’ equivalent rate sits at 53.5%. Why the “odd and irrational” 6.5% discrepancy?
Neidle argues against the UK tax system’s focus on taxing income. “Our tax system puts so much weight on whether a person is an employee,” the former MC partner explains. “The question is whether we should change the law and tax partners in law firms and other large professional firms the same way as employees.”
And it’s not just lawyers that should pay more tax, says Neidle. Other professions that are known for adopting partnership models are also be ripe for reform.
He speculates that if partners at law firms were subject to employer’s national insurance in addition to “management consultants, investment managers, and other large professional partnerships (whether in partnership or corporate form) and it’s realistic to think we’d be looking at between £1.5bn and £2bn of revenue”.
Lawyers seem to have had a mixed reaction to Neidle’s proposal. Malcolm Cammack, head of tax at Hogan Lovells, commented “finally, someone brave enough to say it”, whilst Dentons partner Chris Brennan wrote “why is there no ‘dislike’ button on LinkedIn?”.