UK Taxes

6 Key excerpts on "UK Taxes"

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  eBook - ePub

  Public Sector Revenue

  Principles, Policies and Management

  • Alberto Asquer(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  2 Taxation Principles, types and effects        

  Principles of taxation

  Taxes constitute a main source of public sector revenue in many countries nowadays. While there are many definitions of taxes, especially across different countries, a general understanding of the term is the one provided by the Organisation for Economic Co-operation and Development (OECD, 1996), which defined it as ‘compulsory, unrequited payments to general government’. The meaning of the term ‘unrequited’ is that taxes are paid without any proportionate benefit provided by government to taxpayers. Taxes also include social security contributions, if they are not paid on voluntary basis. Taxes can also include licence fees, although the borderline between taxes and fees (or charges) is not sometimes too straightforward.

  A distinguishing feature of taxes is that tax obligations arise from the power of the government to impose them on taxpayers. In this sense, taxes are a quintessential manifestation of the sovereignty of states. Governments can require particular categories of citizens (or, in some case, residents irrespective of their citizenship) and private entities (such as companies and charities) to pay taxes to contribute to the running of the government and the implementation of public policies and programmes.

  Taxes, however, are not arbitrarily decided. As has been long debated within scholarly and political circles, taxes should comply with the fundamental principles of ‘good taxation’. One of the earliest formulations of these principles is found in the writings of Adam Smith (1776), who identified the principles of fairness, certainty, convenience and efficiency.

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  What is the Economy?

  And Why it Matters to You

  • Joe Richards, Beth Leslie(Authors)
  • 2021(Publication Date)
  • Zed Books

    (Publisher)

  Like most developed countries, the UK has income tax ‘bands’ that are charged different rates. These rates change all the time, but as of early 2020 the first £11,500 UK workers make each year is income-tax free (unless you earn over £100k). Then it’s 20 per cent up to £45k, 40 per cent up to £150k and 45 per cent after that. That doesn’t mean someone earning £50k gives the taxman £20k in income tax each year. Instead, they pay nothing on £11.5k of their £50k salary, 20 per cent on £33.5k of it and 40 per cent on the last £5k. That makes their yearly income tax bill £8,700.

  A little more jargon before we move on . . . 

  Alongside being progressive and regressive, taxes are also described as direct or indirect. The difference is simply this: direct taxes are paid directly to the government. Indirect taxes are paid to an intermediary who then passes it on to the government. Income taxes are direct, because the government takes them straight from your pay cheque. Consumption taxes are indirect, because you pay them to a shopkeeper who then passes them on to the government.

  Thinking about what to tax 

  Governments could, if they wished, decide to introduce levies on anything they fancy. Indeed, there have been some truly odd taxes over the course of human history (in Tudor times there was even a beard tax). But some things are more commonly taxed than others, namely:

  • Income • Consumption (or buying stuff) • Capital gains (something you own increasing in value) • Profits • Property (e.g. council tax) • Imports and exports Are these the right things to tax?

  As ever, it depends who you ask. There are lots of competing ideas floating around for how tax systems should look. Many people think we can make the tax system more lucrative or fairer (or both) by introducing different types of tax to the ones we currently have. Some of the most popular ideas in this field include:

  Wealth taxes

  Some people think that economies should switch their focus from income taxes to wealth taxes to reduce inequality, which sounds a little confusing because most of us would think of income as a form of wealth. But economists distinguish between taxing our earnings (which they call income tax) and taxing our assets (which they call wealth taxes).

  Assets are things of value: a house, a car, a ruby necklace, a pension pot, savings. Many of these things look like they’d be covered by some of the more traditional taxes we mentioned earlier, but the difference lies in when

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  A Treatise on Political Economy

  • Gary Hull, Gary Hull(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  Chapter VIII Of Taxation.

  Section I Of the Effect of all hinds of Taxation in general.

  TAXATION is the transfer of a portion of the national products from the hands of individuals to those of the government, for the purpose of meeting the public consumption or expenditure. Whatever be the denomination it bears, whether tax, contribution, duty, excise, custom, aid, subsidy,* grant, or free gift, it is virtually a burthen imposed upon individuals, either in a separate or corporate character, by the ruling power for the time being, for the purpose of supplying the consumption it may think proper to make at their expense; in short, an impost, in the literal sense.

  It would be foreign to the plan of this work, to inquire in whom the right of taxation is or ought to be vested. In the science of political economy, taxation must be considered as matter of fact, and not of right; and nothing further is to be regarded, than its nature, the source whence it derives the values it absorbs, and its effect upon national and individual interests. The province of this science extends no further.

  The object of taxation is, not the actual commodity, but the value of the commodity, given by the tax-payer to the tax-gatherer. Its being paid in silver, in goods, or in personal service, is a mere accidental circumstance, which may be more or less advantageous to the subject or to the sovereign. The essential point is, the value of the silver, the goods, or the service. The moment that value is parted with by the tax-payer, it is positively lost to him; the moment it is consumed by the government or its agents, it is lost to all the world, and never reverts to, or re-exists in society, This, I apprehend, has already been demonstrated, when the general effect of public consumption was under consideration. It was there shown, that however the money levied by taxation may be refunded to the nation, its value is never refunded; because it is never returned gratuitously, or refunded by the public functionaries, without receiving an equivalent in the way of barter or exchange.

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  The Economy of Ireland

  National and Sectoral Policy Issues

  • John W. O'Hagan, Carol Newman, John W. O'Hagan, Carol Newman(Authors)
  • 2014(Publication Date)
  • Gill Books

    (Publisher)

  For a policymaker, the design of a ‘good’ taxation system that adheres to the above principles is challenging. In general, a balance has to be struck between the competing objectives of equity and efficiency while minimising complexity and raising sufficient revenue. Striking such a balance is not straightforward; for example, an income tax incentive solely targeted at the female labour supply might be more efficient than a population-wide measure but it would not be equitable. Similarly, females, who on average live longer, should perhaps pay more social insurance contributions than males; again, a policy proposal with efficiency merits but with problems when it comes to equity. Conversely, there may be equity merits in having low taxes on food, to assist low-income households to make ends meet; but better-off households will also benefit, raising questions of efficiency. Below, we outline the Irish taxation system and subsequently evaluate it relative to these principles.

  3 THE IRISH TAXATION SYSTEM Throughout this section and the remainder of the chapter various concepts and features of a taxation system are discussed. At the outset, some clarity on the meaning of these phrases is appropriate.

  Governments can impose taxes directly, through the reduction of an individual’s real income and the transfer of that revenue to government, or indirectly, through the imposition of consumption taxes or user charges on goods and services. Therefore, direct taxes allow government greater ability to target taxation measures towards particular groups of specified earners and to pursue the aforementioned objective of progressivity. The tax base comprises that which is to be taxed and can include income, consumption, property, profits and wealth. A narrow tax base will concentrate tax collection across a limited number of these areas, while a broad tax base will include many if not all of them.

  The incidence of taxation measures on whom a tax falls. This can be on producers or consumers, on those at particular income levels or situated in particular industries or regions. In this regard a distinction needs to be made between the legal and effective incidence; for example, brewers may legally have to pay the excise duty on alcohol but in practice it may be fully paid for by the consumer. The tax rate captures the scale of the charge imposed by government relative to a good’s/service’s price or income level. In income tax, we consider average tax rates, also known as effective tax rates, which summarise the overall proportion of an individual’s income that is paid in taxation. The effective tax rate differs from the marginal tax rate

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  The Sixth International Congress on Accounting 1952

  • Various(Author)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  every one of the 15 million taxpayers, however small his income, of nearly £300 for the year.

  In considering these figures and Sir Stafford Cripps’ statement as to 40 per cent, of national income passing away in taxation (including in that case local taxation), one must also bear in mind that the contributions range from the first humble 3s. of the person just liable to tax, to 97J per cent, of the upper slice of the taxpayer whose income exceeds £15,000 for the year.

  These condensed figures do, however, convey something of the financial weight being taken by the United Kingdom as a whole. Two earlier milestones of receipts from direct and indirect taxation (combined) for other financial years make an interesting comparison :

  1913-14	£175,000,000
  1925-26	£758,000,000

  In all these comparisons, such important factors as the purchasing power of income, the size of the national income, the total population of the country and the number of persons contributing to taxation must be borne in mind. Nevertheless, these total figures, and especially the composition of the taxes in the present national total, shown in the diagram, do tell their own story.

  Incidence and Impact

  This paper is concerned with the incidence of taxation, i.e. the persons upon whom the charge ultimately rests, and not the person first paying the tax—the point of impact.

  1 Table 2 of National Income and Expenditure of the United Kingdom, 1946-50. Command Paper 8203, April, 1951.

  2

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  The Structure and Reform of Direct Taxation (Routledge Revivals)

  • James Meade(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  In order to answer such questions one must have in mind what one would regard as the desirable characteristics of a tax structure. We consider the most important of these under the following six headings:

  1. Incentives and economic efficiency
  2. Distributional effects
  3. International aspects
  4. Simplicity and costs of administration and compliance
  5. Flexibility and stability
  6. Transitional problems.

  1 Incentives and Economic Efficiency

  There are many channels through which a tax system may affect economic efficiency. It can have important effects on incentives and opportunities to work, to save, to invest in capital developments, to take risks and innovate, to use resources efficiently and to allocate them to uses which best serve the needs of society.

  To a large extent these efficiency effects depend upon the total level of taxation. If the need for tax revenue to finance a large public sector is high, some tax rates will inevitably be high with inevitable effects upon some economic opportunities and incentives. We have not regarded it as part of our task to consider what is the proper balance between the public and private sectors of the economy and what, in consequence, is the proper target for total tax revenue. But there are different ways of raising a given tax revenue with differing effects upon economic opportunities and incentives; and this aspect of the matter we do regard as being at the heart of our inquiry.

  The economist distinguishes between the ‘income effect’ and the ‘substitution effect

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