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Socialist Review Index (1993–1996) | Socialist Review 173 Contents
Socialist Review, March 1994
From Socialist Review, No. 173, March 1994.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Archive.
Marked up by Einde O’Callaghan for ETOL.
Proportion of poll tax
unpaid at end of year
- The Tories say that reducing taxes on the rich means there
is less tax evasion. Between 1979 and 1990 the amount of tax
uncollected at the end of the year rose from £847 million to £4,323
million. In 1979 the amount of tax written off as uncollectable was
£60 million. Ten years later it was £531 million.
- Between 1990 and 1992 (the most recent figures) the amount
of tax ‘written off’ was £3,147 million. Over the next two
years the Tories plan to raise £3,250 million by imposing VAT on
- In 1978 the basic rate of tax was 33 percent and the top
rate was 83 percent. Now the standard rate is 25 percent – but the
top rate is 40 percent, less than half what it was.
- As a direct result of Tory tax changes over the past 15
years higher rate taxpayers have been given an extra £14,800
million. A full £9,000 million of this tax handout was shared by
just 190,000 people – that’s £47,368 each.
- In 1988 the Tories cut tax for the rich by up to £200 a
week for someone on £90,000 a year. Company directors on £250,000
received a handout worth £650 a week.
- When the Tories changed inheritance tax in 1988 it meant
that someone inheriting an estate worth £2 million was instantly
given an extra £343,000.
- The means test on social security benefits means that low
paid workers pay tax at a higher rate than the rich. In 1993 there
were more than half a million full time workers taxed at 50 percent
or more on part of their income, compared to the top rate of 40
percent for the rich.
- Income tax in 1994 will raise about £65 billion. Workers
contribute about £49 billion of this. We will pay a further £43
billion in VAT and more than £8 billion council tax. By contrast
taxes which fall exclusively on the rich – capital gains tax and
inheritance tax – come to £2.7 billion.
- In 1994 the amount paid by workers in National Insurance
contributions – £17.6 billion – will be exactly the same as the
total tax on company profits.
- Tax collected from company profits (corporation tax) has
fallen from 20.7 percent in 1989 to less than 15 percent. In 1991
the Tories cut the rate of corporation tax and changed the rules to
allow companies to offset losses against tax for up to six years. In
the same period dividend payments to shareholders increased by more
than 21 percent. Between 1980 and 1992 the amount paid out by
companies in dividends was just under £150 billion.
- Tax evasion is illegal. Tax ‘avoidance’ is legal.
Simple measures of tax avoidance available to the rich include
offshore funds (sending money abroad), using ‘business reliefs’,
setting yourself up as a company, and setting up trusts for
children. Until last November it was legal to pay company executives
in gold bars or coffee beans – closing this one tax loophole was
worth £270 million.
- According to the Tories, the growth of self employment
proves the success of the ‘enterprise culture’. There are
currently about 3.4 million self employed. Of these 870,000 paid no
tax at all last year, because they had declared earnings of less
than £10,000. In 1994 it is estimated that 9.9 million workers
earning less than £10,000 will have to pay tax.
- Executive share option schemes allow directors to buy their
own company’s shares at a future date but at today’s price. By
speculating in this way directors can avoid income tax on shares
which are worth up to four times their salary. In the last quarter
of 1993 the average profit made in this way was £102,221.
- According to one estimate (by American Express) as much as
£60 billion is spent each year on ‘business expenses’. But only
£40 million a year – less than 0.1 percent – is reported to the
Inland Revenue as taxable expenditure on entertainment.
- Eight out of every ten households will lose income as a
result of tax changes this year. The average loss will be nearly £10
a week. A family with one earner and two children will be paying an
extra £22.32 a week in tax from April 1995.
- According to government expenditure surveys, VAT costs the
richest households about 6 percent or their income. It costs the
poorest households nearly 12 percent.
- The poorest households pay more than £8 a week in fuel
bills – 14 percent of income. The richest pay about £20 – 2.5
percent. As a proportion of income VAT on fuel will cost the poorest
five times more than the richest.
- Tax changes this year mean that 400,000 low paid workers
will have to pay tax for the first time. On average it will cost
them an extra £5.28 a week.
Some state spending plans
over the next 3 years
Interest on government debt
Home office: prisons, police etc.
Government legal departments
Foreign Office: embassies, diplomats
Taxes, National Insurance etc.
as percentage of output
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