Poorest 10% taxed most heavily, TPA research finds

14 Aug 15

The poorest 10% of households pay the highest proportion of their gross income in taxes of any income group, according to an analysis by the Taxpayers’ Alliance.

The study by the low tax campaign group found that the bottom decile of households paid 45% of their gross income in tax in 2013/14, compared to 34.2% average for the entire population. 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%).

The TPA said the analysis, which is compiled from Office of National Statistics data, showed that Britain's tax system is neither progressive nor balanced across different income groups.

Chief executive Jonathan Isaby said the figures showed claims by both the coalition government and the current Conservative administration that increasing the income tax personal allowance lifted people out of taxation was based more on perception than reality.

It was taxes such as VAT and council tax that hit the poorest families hardest as a proportion of their income, he added.
“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 think-tank called on the government to bring National Insurance thresholds in to line with income tax so that the lowest paid were lifted out of earnings taxes and as a first step towards the abolition of National Insurance. They also said VAT should be cut, which could be offset by widening the base on which the tax is levied, and also reducing so-called sin taxes on alcohol and tobacco, which hit the poorest hardest.

Today’s Distribution of tax burdens and benefit receipts report also found that the top 10% of earners paid an average of £30,023 more in tax in 2013/14 than they received in state benefits or services, while the average household paid £462 more in taxes than they received in benefits and services. This is a significant increase on 2012/13 when the figure stood at only £274.

The top 10% of households also received an average of only £391 in non-contributory cash benefits, compared to £3,623 for the lowest tenth, and £5,191 for the third-lowest decile, the most of all income groups.

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