Rishi Sunak announced a freeze on major income tax and capital gains thresholds while serving as chancellor in 2021. Credit: NEIL HALL/Shutterstock
Rishi Sunak's Analysis by the Organization for Economic Co-operation and Development (OECD) shows that payments to the Treasury have increased by 40% since the pandemic as a result of a hidden tax raid.
Payments taxes on income and wealth, such as income tax and capital gains tax, rose by 39.2% in the first quarter of this year compared to the last months of 2019, the OECD found.
The UK household tax burden has risen faster than other large wealthy countries, analysts say, despite all of them facing similar blows due to Covid-19.
In contrast, Americans are paying slightly more than 30% more. than before Covid.
In the first quarter of 2023, British households paid £84bn in income and wealth taxes to the Treasury, compared to £60.6bn in the last three months of 2019. corrected data.
Much of the increase reflects the freezing of major income tax and capital gains thresholds. The then chancellor Sunak announced a freeze until 2025–2026 in March 2021. His successor at the Treasury Department, Jeremy Hunt, has since extended it for another two years.
2906 Additional taxpayer rates double
Thresholds maintained. despite high inflation pushing more workers into higher tax brackets when they receive a pay raise.
Critics have called the frozen thresholds a covert tax raid, pointing out that wages continue to fail to keep up with bills and prices.
Tom Waters of the Fiscal Research Institute said: “Nominal incomes are rising pretty fast, so with fixed thresholds, more people are being taxed and at higher tax rates, and more of people's income is being taxed at higher rates.” p>
“Another possible factor is that there is some evidence of growing income inequality in the UK, with rapid growth in higher paying sectors. High-income people have higher marginal tax rates, so rising income inequality leads to higher tax revenues.”
The OECD report came after US data showed that inflation there rose for the first time in more than a year. The annual increase in prices in July rose to 3.2% compared to 3% in June.
The higher inflation rate was largely driven by rising housing costs, including rents. However, growth was less than economists expected.
US inflation is also less than half of the 7.9% registered in the UK in June.
Among OECD countries, German household tax payments showed the smallest increase since the pandemic – by 7%
.
Canadians' tax liabilities increased by a quarter, while French payments increased by one tenth.
In the UK, fixed thresholds have helped push the tax burden to its highest level as a share. GDP since 1948, according to the Office of Fiscal Responsibility.
Highest tax burden since World War II
John O'Connell, executive director of the Taxpayers Alliance, blamed Whitehall's expenses.
He said: “Families across the country are feeling the impact of out-of-control government spending.
“Huge spending in the public sector and a boom in civil service jobs are driving high taxes on hard-pressed Britons. Politicians need to rein in spending and give taxpayers a well-deserved respite.”
Treasury Department spokesman said public finances need to be strengthened after pandemic-related spending.
The spokesman said: “After borrowing hundreds of billions pounds sterling to fund the pandemic and support energy bills, our tax system helps restore public finances in the most equitable way, with those who earn the most bear the brunt.
“We have the highest starting thresholds for personal tax benefits in the G7, and we're looking to secure wages while we stick to our plan to halve inflation.”
Elsewhere, the latest weekly US employment data shows nearly a quarter of a million people have filed new jobless claims. The rise surprised analysts and suggests the job market may cool faster than previously thought.
Recent Comments