The poorest 10% of families continue to pay by far the largest proportion of their gross income in taxes according to analysis by the TaxPayers' Alliance (TPA), which says that the tax system is neither progressive nor balanced across different income groups
The campaign group says its research, compiled from Office of National Statistics data, demonstrates that much of the rhetoric around ‘lifting people out of taxation’ or ‘ensuring that those with the broadest shoulders bear more of the burden’ is based more on perception than reality.
TPA’s calculations found that the poorest 10% of households paid an average of 45% of their gross income in taxes in 2013-14, the highest percentage of any income group, representing a slight decrease from 47% in 2012-13.
This is mostly due to indirect taxes such as VAT, council tax, fuel duties and duties on alcohol and tobacco, with VAT proving the most burdensome tax for households in the lower half of the income scale, according to TPA calculations, whilst income tax is the most burdensome for the upper half.
In comparison, the average for the entire population was 34.2%, and no other decile paid more than 35.2%. This was paid by the ninth decile, who paid slightly more than the top decile (34.6%) and the eighth (35%).
TPA’s figures also show that the top 10% of households paid an average of £28,685 more in tax than they received in cash benefits and benefits in kind such as education and the NHS in 2013-14.
Before taxes and benefits, the most well-off households had an average income 27.4 times higher than the households on the lowest incomes, but after tax and benefits this fell to 6.1 times higher.
The average household paid £462 more in taxes than they received in benefits and services, a significant increase on 2012-13 when the figure was £274.
Jonathan Isaby, TPA chief executive, said: ‘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 reasonable, and the government must stick to its spending targets so that the radical reform we need can finally happen.’
The TPA is calling on the government to stick to its spending target; 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; reduce the rates of VAT while broadening the base; reduce the rate at which ‘sin taxes’ are levied; and resist calls to introduce further taxes on the highest earners.
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