Sunday, April 15, 2012

UK Tax report : 25% who cheat means 75% who don't

Tax, and who should pay what, and who actually does, is a cornerstone of modern society, so interested to see some statistics on tax payments for higher earners 

Treasury reveals how little tax the super-rich pay | Society | The Guardian

The article reports "The new Treasury figures show 10,000 UK taxpayers earn between £1m and £5m, and, of those, 10% pay between 30% and 40% in tax, 5% pay between 20% and 30% tax, and 3% pay less than 10%. Of those earning between £250,000 and £500,000, 27% were paying tax of less than 40%. All the figures cover the financial year 2010-11."
While it is disgraceful that significant numbers seem to be avoiding paying what they should in tax, at least these numbers suggest that at least 75-80% of higher earners are paying above 40%, which I assume is roughly the appropriate rate. Furthermore the most suspicious cases (paying tax of less than 10% on vast income)  seem to correspond to about 5% at all levels (250,000-500,000,1m to 5m, above 5m etc).

While of course this is a disgrace, and apart from the moral problem corresponds to significant lost revenue, one can always find 5% of people with some kind of objectionable behaviour/outlook (for example in all countries roughly far right parties attract this level of support or more), so this would tend to suggest it's not a failure of morals in society (the UK is not a nation of cheats) but a failure of enforcement and policy. One could probably expect at least 5% to try to cheat, the issue is how many get away with it.

Perhaps too newspapers should report the 80% number as well, since I read once of a case in Australia where tax payments rose after it was reported by the revenue commission there that 'most' people pay their taxes fairly. If people think everyone else is doing the right thing, then they are more likely to do so themselves, even if not being obeserved. Similarly they are probably more likely to do the wrong thing if they think everyone else is. So while it is worth pointing out that 5% of people cheat to extremes, it's also worth highlighting that 95% don't.

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