Comments on: How Rowntree could have tackled the tax issues of concern http://www.taxresearch.org.uk/Blog/2006/08/24/how-rowntree-could-have-tackled-the-tax-issues-of-concern/ Richard Murphy on tax and corporate accountability Tue, 06 Jan 2009 11:28:59 +0000 http://wordpress.org/?v=2.6 By: Mark Wadsworth http://www.taxresearch.org.uk/Blog/2006/08/24/how-rowntree-could-have-tackled-the-tax-issues-of-concern/#comment-338 Mark Wadsworth Wed, 30 Aug 2006 14:39:54 +0000 http://www.taxresearch.org.uk/Blog/2006/08/24/how-rowntree-could-have-tackled-the-tax-issues-of-concern/#comment-338 In terms of benefitting lower earners on a fiscally neutral basis, a much higher personal allowance (to prevent anybody falling into an income level where they simulaneously pay tax AND suffere benefit withdrawal) is much more important than having lower and higher rates tax. As a simple mathematical exercise, to calculate the total PAYE income tax plus Employee's NIC contributions of a higher rate employee, all you have to do is deduct £13,333 from total salary and times by 41%. How much lower would the total tax/NI liability of a basic rate employee be, were they allowed to use the same calculation as higher rate taxpayers? In terms of benefitting lower earners on a fiscally neutral basis, a much higher personal allowance (to prevent anybody falling into an income level where they simulaneously pay tax AND suffere benefit withdrawal) is much more important than having lower and higher rates tax.

As a simple mathematical exercise, to calculate the total PAYE income tax plus Employee’s NIC contributions of a higher rate employee, all you have to do is deduct £13,333 from total salary and times by 41%. How much lower would the total tax/NI liability of a basic rate employee be, were they allowed to use the same calculation as higher rate taxpayers?

]]> By: Jason Holden http://www.taxresearch.org.uk/Blog/2006/08/24/how-rowntree-could-have-tackled-the-tax-issues-of-concern/#comment-270 Jason Holden Thu, 24 Aug 2006 12:08:31 +0000 http://www.taxresearch.org.uk/Blog/2006/08/24/how-rowntree-could-have-tackled-the-tax-issues-of-concern/#comment-270 Richard you hit on something that is all to often forgotten about, and that’s indirect taxation. When people go on about tax, they are usually thinking about PAYE/NIC/Sch D etc, but the biggest burden felt by many has to be indirect taxation. 17.5% VAT on everything you buy and not forgetting the Council Tax which I imagine for many of the elderly on fixed (low) incomes this tax in real terms can make the higher rate tax of 40% for higher earners’ seem very low. For example, an elderly couple on state pension assuming they are lucky enough to have £84.25 (I think is the current basic state pension) then the wifes pension based on husbands NIC £50.50 giving a weekly income of £134.75 or £7,007 pa then assuming they have the average council tax bill of say £967 (2004/05) this is a whopping 13.80% of their income or £18.60 per week out of their £134.75 which when you consider recent and extremely high increases in electricity and gas all of which have VAT on them the elderly is certainly a segment of society that a revamp of not direct but indirect taxes as a whole would benefit. So how is the tax system and its simplification dealt with, well I for one am not clever enough to think I could do it, but I do think it should be looked at and replaced with a fair tax for all, one that doesn’t leave the old and very low paid cold and hungry but one that also doesn’t punish the high earners and achievers for the efforts. Richard you hit on something that is all to often forgotten about, and that’s indirect taxation.

When people go on about tax, they are usually thinking about PAYE/NIC/Sch D etc, but the biggest burden felt by many has to be indirect taxation.

17.5% VAT on everything you buy and not forgetting the Council Tax which I imagine for many of the elderly on fixed (low) incomes this tax in real terms can make the higher rate tax of 40% for higher earners’ seem very low.

For example, an elderly couple on state pension assuming they are lucky enough to have £84.25 (I think is the current basic state pension) then the wifes pension based on husbands NIC £50.50 giving a weekly income of £134.75 or £7,007 pa then assuming they have the average council tax bill of say £967 (2004/05) this is a whopping 13.80% of their income or £18.60 per week out of their £134.75 which when you consider recent and extremely high increases in electricity and gas all of which have VAT on them the elderly is certainly a segment of society that a revamp of not direct but indirect taxes as a whole would benefit.

So how is the tax system and its simplification dealt with, well I for one am not clever enough to think I could do it, but I do think it should be looked at and replaced with a fair tax for all, one that doesn’t leave the old and very low paid cold and hungry but one that also doesn’t punish the high earners and achievers for the efforts.

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