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UK wrongly believes rich pay more tax – report

Published time: June 16, 2014 13:46
Edited time: June 27, 2014 07:49
Reuters / Chris Helgren

Reuters / Chris Helgren

The wealthiest 10 percent in the UK pay a smaller proportion of their income tax than the poorest 10 percent, meaning that in general, the UK vastly overestimates the tax burden on the rich.

The new report, entitled ‘Unfair and Unclear: The Effects and Perception of the UK Tax system’, was released by think tank the Equality Trust on Monday.

More than 1,000 people aged 16-75 were surveyed by the think tank in collaboration with market research company Ipsos Mori.

“The public believe the UK’s tax system is more progressive than it is, with nearly seven in 10 people (68 percent) believing that households in the highest 10 percent income group pay more of their income in tax than those in the lowest 10 percent. In reality, the top 10 percent pay a smaller proportion of their income in tax than the bottom 10 percent,” which is 43 percent compared to 35 percent, 8 percentage points less than the bottom 10 percent, the report states.

According to the report, the higher percentage paid by the poor is comprised of indirect taxes on consumption and “more than four times as much of their income in council tax as the top 10 percent.”

Duncan Exley, director of the Equality Trust, commented on the necessity to instigate efficient and progressive reforms given the report’s findings.

“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,” Exley said.

The think tank also found that 96 percent of respondents believe that the UK tax system should be more progressive than it is now.

“Tax plays a hugely important role in people’s lives. It can determine the affordability of basic necessities like food and bills. But it can also determine the quality of local services, healthcare and education. It is important that people are aware of who pays tax, but equally we must build a tax system that better reflects people’s preferences,” Exlex added.

As a result of the report’s findings, recommendations were made that council tax should become a progressive property tax, government should look to reduce VAT when it has a budget surplus, and the upper limit of National Insurance should be raised.