The British electorate considerably underestimate how much the lowest earners in the country pay in tax and are under a false impression that the country’s richest shoulder the largest burden on their income from tax, according to compelling and insightful new data compiled by a leading think tank who has called for an overhaul of the current tax system.
The Equality Trust conducted a study to analyse whether the commonly held belief that the highest earners in the country prop up the overall tax revenue actually has any foundation.
And intriguingly, they found that the lowest earning 10% of households in the country pay eight percentage points more of their overall salary on all taxes charged in the UK than the richest- 43% in comparison to the 35% attributed to the higher earners.
‘Public being misled’
The thinktank was keen to emphasise its view that most people misunderstand how the tax system really works and highlighted that its findings clearly reinforce the notion that perceptions of taxpayer contributions are different in theory than they are in actual reality.
Its statistical investigation conducted in tandem with Ipsos Mori interestingly found that around 70% of people in the country hold the false impression that the highest earning 10% of individuals in the country pay a larger percentage of their annual; wage than the bottom 10%.
And whilst these figures suggest a degree of naivety from the electorate toward the reality of the tax system in the country, separate data conducted to gauge public attitudes towards taxation in the UK has refreshingly indicated that 96% of 1000 people surveyed believe that progressive reform is needed at a faster rate than it is being enacted at present.
Duncan Exley, director of the Equality Trust, has argued that the collective findings of both surveys highlight the importance for the next government to overhaul the existing taxation system and create a clearer and fairer model which benefits rather than crippling the finances of individuals in society.
“The public are misled about this country’s tax system. They think households with the highest incomes pay more than those with the lowest, whereas the opposite is the case. Even more concerning is how little our current system matches people’s preferences on tax. There is clearly strong support for a system that places far less burden on low-income households,” he said.
“We’re calling on all parties seeking to form the government from 2015 to commit to the principle that any changes in tax policy are progressive.”
Tax system overhaul
The misunderstanding of the taxation system which is alleged to currently be exhibited by large sections of the electorate was again displayed in a different question asked during the Equality Trust’s study which quizzed individuals about how much they thought the richest and poorest in the country actually pay on average on tax each year.
Shockingly, the results indicate that not even one person was aware of the average contributions made by the country’s highest and lowest earners, with the data suggesting that on average the electorate undervalues how much the bottom 10% of earners in the country pay on their tax by a monumental 19 percentage points, thinking that they only contribute 24% of their salary toward tax payments each year.
When queried about how the measures they would adopt in order to enhance fairness within the tax system, on average individuals identified that the lowest earning10% in the country should be taxed a lower 15% of their overall salary, or a staggering 28 percentage points lower than they are required to at present.
Moreover, most disclosed that they think the highest earning 10% in the country should be taxed 39%, or 4 percentage points higher than they are obligated to do at present.
Clearly this methodology can never be enacted in reality, especially if the government is keen to continue its relentless pursuit of bringing down the public deficit, and serves to highlight how public awareness of the tax system needs to be enhanced in order to promulgate its reform on a mass scale.
Equality Trust argued that the larger percentage of their income paid by the poor at present was a result of a multitude of taxes, rather than one.
The report said the higher percentage paid by the poor at the moment was down to a number of taxes.
“While income tax and national insurance are broadly progressive, the bottom 10% of households pay roughly 23% of their gross household income in indirect taxes on consumption and more than four times as much of their income in council tax as the top 10%,” it said.
It called for the next government in power to implement drastic reforms to the current council tax system, by re-assessing the taxpayers properties and implementing new bands with larger rates for household’s with higher valued properties. It also urged MP’s to slash VAT when the government finally manages to bring down the public deficit to a level where there is a budget surplus.Source; MoneyExpert