Is the UK Really a High-Tax Country?

Not for Most Workers!

It's a widespread view that the UK is a high-tax country, but this not really accurate, at least for the average worker.

Most Britons have actually benefited from decades of tax reform, with the burden of income tax and national insurance decreasing over the years on the shoulders of average earners....

Twenty years ago, in 1990, a full-time employee on the average wage of £12,000 would have had approximately 28% of their earnings consumed by national insurance and income tax. Today, tax on the average wage of £39 000 (NOTE INFLATION!) is a total of just 19%. And for someone who is paid just half the average, the average tax rate is only 10%.

In comparison, the identical earner two decades ago in 1990 would have shelled out twice as much.

And in comparison to similar countries...?

Typical earners in Australia (25%), the United States (24%), and Belgium (a staggering 40%) hand over far more of their salary to the taxman.

And while British wages might appear lacklustre compared to Germany's, net salaries are another story. Subtract taxes and social security contributions, and the average German worker is left a whole £5,000 worse off than his or her British counterpart.

However, this relatively low burden on middle-income earners is offset by the increasing reliance on high-income earners to fund the UK's public services. Those earning over £70,000 currently contribute 60% of all income tax collected but comprise a small proportion of the population.

More disproportionately, the top 1% of taxpayers contribute 29% of all income tax receipts. In practice, Britain's progressive tax system relies on its wealthiest citizens to finance the welfare state.

This raises an uncomfortable question: should the average worker cough up a little more? With an ageing population, rising pressures on the NHS, and rising social care bills, the sustainability of a tax system where the majority of individuals pay comparatively little is being called into question.

Final thoughts...

Ultimately, then, while Britain may seem a high-tax country on paper, the reality is more ambiguous. For the average worker, the tax burden is relatively low by international standards. But with public services still groaning under the strain of cost, calls may increasingly be made for a broader, fairer spread of tax burden.

Maybe we just need to raise taxes...?!?

Posted Using INLEO