Wednesday, 20 March 2013

Daily Mail under-estimates how much tax Mr & Mrs Average pay: Shock

Via BobE, from Mail Online:

When most people think about tax, they think of income tax. This, largely, is taken directly from your pay each month, or through self-assessment tax forms if you are self-employed...

The article then goes on to list and explain the main taxes which people pay and summarises in this handy table:
I can see two big mistakes right there:

1. They missed off Employer's National Insurance, which is another £5,177.

2. VAT is on average at least 7% of people's gross earnings or total income (with a wide range, depending on whether you work for a VAT-able or a non-VAT-able business).

If you adjust for those two and treat Child Benefit as negative tax, the actual tax bill on Mr & Mrs Average is something like £22,600, i.e. half their total earnings. Which is hardly surprising, because the government spends/redistributes about half of GDP.

6 comments:

Lola said...

Yep. TPA, and the SAI calculate 'cost of government' and 'tax freedom days' respectively. Both give it as somewhere between end of May and end of July. So on average it's the end of June = 50% give or take.

Lola said...

Ooops. For SAI read ASI.

mombers said...

How about just dividing total government revenue by households? The vast majority of taxes are borne by UK residents (some like Stamp Duty on shares are paid by foreigners). Mark, how about some analysis along these lines

Mark Wadsworth said...

L, in which I agree. These right wingers are useless on logic but pretty reliable on hard facts.

M, comes to the same thing, approx.£600 billion in taxes collected divided by 27 million households = £22,000 tax per average household (including taxes borne by 'companies', which is not the issue here as Mr & Mrs Average only have employment income and no investment income).

Tom Seddon said...

It always seems to me like cheating to include employer's NI in these calculations. It doesn't come out of gross salary, any more than does the cost of equipment/electricity/heating/insurance/etc. for the employee.

It's something that could be marshalled in support of an argument, I'm just not convinced it's much use for this one.

Mark Wadsworth said...

TS, of course it comes out of gross salary! From the employer's point of view, the gross salary (i.e. the maximum he is prepared to pay somebody in total to do the job) is wages + Er's NIC.

And if that is your argument, then we would have to exclude VAT entirely, because that is also paid by the employer out of the difference between his turnover and your wages.

There's no legal liability on the consumer to actually hand over the VAT to the taxman, and we know that when the VAT rate changed, the main impact was on businesses' gross margins rather than selling prices (hard facts again, bugger the theory which says exactly the same thing).

And even if the mythical employer pays the Er's NI out of his own pocket, aren't employers and shareholders still people?