The last Prime Minister’s Questions before the election involved the usual knockabout politics between the leaders, with one notable subject: VAT. And well it might be a good subject, as the following figures are true: Income Tax represents 25.7% of the total tax receipts forecast for the UK in 2014-15, while National Insurance and the aforementioned VAT come in at a whopping 17.0% and 17.1% respectively. No wonder a rise in VAT is such a touchy subject – as it is a secondary tax (ie we don’t see it on our payslips) but it brings in 2/3rd of the value of receipts of Income Tax. In celebration of the possible upcoming arguments on the subject of tax as we head to the election, here are some election tax bingo statements for you to tick off as you listen to various radio programmes and debates.
- Inheritance Tax only accounts for 0.8% of the total annual tax receipts, while Stamp Duty Land Tax accounts for 2.0%
- Only 4.5% of estates are currently liable for any inheritance tax – but this is up from 2.8% in 2010
- Corporation Tax and Business Rates bring in roughly the same as Fuel Duties, Vehicle Excise and Council Tax (roughly 10% for each group)
- Tax Credits cost the government the same amount as they bring in under Betting and Gaming Duties (roughly £2.5Bn)
- Without raising the rate of VAT (“Will he raise VAT?”…. “No”), the government could increase the VAT take by £8.6Bn (a 7.3% increase in the total VAT take) by re-rating Transport, Books and Private Education.
- North of the Irish Border, Corporation Tax is 21%. South of the Border it is 12.5%. (that’s an amazon’ difference ……)
- The number of individuals paying tax since 2010 has dropped from 31.3M to 29.9M
- The number of basic rate taxpayers since 2010 has dropped from 27.7M to 24.7M
- The number of higher rate taxpayers since 2010 has risen from 3.25M to 4.95M
- In 2010, the top 1% of earners paid 25% of the tax, in 2015 they pay 27% (the top 10% are paying 5% more of the total and the top 50% are paying 1% more – but remember these are Income Tax only)
Having ticked off all of these sound-bites, you may then pause to think about what has actually happened to society and the tax and wealth distribution since 1979 (was this the year of the death of the old Left… it might be argued that all parties since then have been of a similar mould). The following 10 snippets show that regardless of the party in power, the government has pursued a policy of lowering mainstream taxes – which actually comes from a centre-right agenda. The only things remaining that could be regarded as “leftish”, are those that are about environment and health.
- Basic rate of tax cut from 33% to 20%
- Top rate of tax cut from 98% to 45%
- Mortgage interest and life assurance premium relief abolished
- Employee NI increased from 6.5% to 12%
- Stamp duty on shares and bonds cut from 2% to 0.5%
- Small companies rate cut from 42% to 20%
- Corporation tax cut from 52% to 21%
- PEP, TESSA and ISA introduced
- Large (above inflation) increases in tax on fuel, tobacco, wine, spirits
- Introduction of air passenger duty, landfill tax, climate change levy and aggregates levy
Either way, the massive complexity of the tax system and its perceived effect on our wallets will probably mean that the election will come down to the feel-good factors, not really controlled by the government – eg the fuel price. And if you’re feeling left-ish, you may argue that National Insurance changes since 1979 have outweighed the changes in the Income Tax rate, so therefore the system is still stacked towards the better-off. Also, health and the environment are cross-party issues and not on the agenda for discussion….decisions decisions, and such a lot of data, maybe we should vote based on the personality of the leaders….. er….
Have a great weekend