A report just published by the Taxpayer’s Alliance has found that the poorest 10% of households in the UK pay 47% of their gross income in direct and indirect taxes.
Analysis of Office for National Statistics figures for 2012-13 by the organisation shows that VAT accounts for 13.9% of the gross income of the bottom 10%, whose total gross income was £9,743 (inclusive of benefits), and 7.2% is accounted for in council tax.
Combined direct and indirect taxation accounted for £4611 of gross income, leaving £5132.
In contrast, the wealthiest 10% of households paid 35% of their gross income (including benefits) in taxation, with income tax accounting for 19.1%.
Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, says in the report “This analysis shows how pernicious our tax burden has become. Not only does the tax system hit the poorest hardest, but those at the top are already contributing far more than anybody could reasonably describe as their “fair share.” Our tax system is neither progressive nor fair, and we need radical reform as well as necessary savings if the way we tax and spend is to become fit for purpose.”
The Taxpayer’s Alliance suggests that all parties should commit to:
Bring National Insurance thresholds in to line with Income Tax, to lift the lowest paid out of earnings taxes and as a first step towards the abolition of National Insurance.
- Bringing down, not hiking, VAT.
- Reduce the rate at which “sin taxes,” which hit the poorest hardest, are levied
- Resist calls to introduce further taxes on the highest earners
- Address the deficit through bringing spending down, rather than through further taxes
A survey conducted by the Equality Trust shows that the British public dramatically underestimate what the poorest pay in tax and wrongly believe the richest face the biggest tax burden.
Its poll, conducted with Ipsos Mori found that nearly seven in ten people believe that households in the highest 10% income group pay more of their income in tax than those in the lowest 10%.
Duncan Exley, director of the Equality Trust, said the findings underlined the need for the next government to overhaul the system.
“The public are misled about this country’s tax system. They think households with the highest incomes pay more than those with the lowest, whereas the opposite is the case. Even more concerning is how little our current system matches people’s preferences on tax. There is clearly strong support for a system that places far less burden on low-income households,” he said ahead of the “Unfair and Unclear” report.
“We’re calling on all parties seeking to form the government from 2015 to commit to the principle that any changes in tax policy are progressive.”
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