Are taxes for Britain's richest among the highest in world?
"Wealthy Britons are being taxed at a higher rate than almost any other leading nation in the world, new analysis shows, as stealth taxes mean that entrepreneurs are being driven away."
The Telegraph, 5 November 2012
Last week UHY, an umbrella network of accounting and consulting firms, published a press release titled: "Major European economies pile on the taxes" which was then picked up by the Telegraph and City AM.
The firm looked at data relating to income tax in various countries and carried out calcuations: "based on the basic 'take home pay' of a single, unmarried employee after income taxes and employee social security contributions are deducted for salaries of $25,000, $50,000, $200,000, $250,000, and $1,500,000."
This is how the Telegraph reported the story:
Reading further into the article reveals that the 'world' in the headline refers to 26 countries sampled, and that the UK finishes ninth out of 26 for tax burdens of those earning over £125,000 ($200,000).
These 26 countries feature 17 from the Organisation for Economic Cooperation and Development (OECD), as well as major and emerging economies such as China, India Russia and Brazil. UHY's findings are below:
As the findings show, the UK's placing varies considerably depending on which specific income bracket is used. The UK may be the ninth when it comes to earnings above $200,000 (£125,000), but it ranks as the eleventh 'most generous tax regime' among lowest earners, i.e. people on £16,000 a year.
That said, the UK also placed as high as sixth for the very top earners: people earning £950,000 a year or more. City AM's coverage of the story focussed on this income bracket:
"UK's highest earners face sixth highest tax burden in the world"
So how does the UK rank according to others? Bearing in mind this is a very complex issue, the OECD has also compiled a dataset on income tax rates among its members.
According to the latest OECD stats (2011) the UK ranks fourteenth among 35 countries if we consider the all-in tax rate - calculated as the combined central and sub-central government income tax, plus employee social security contribution as a percentage of gross wage earnings - for single people with no children.
To capture the 'richest' bracket, the figures concern only those who earn 167% the wage of an avearge worker:
Of course, this chart is fairly different from the one presented by UHY for two man of reasons: first, it only scrutinises OECD countries; second, the income bracket taken into consideration is that which earns 167% of the average wage, not the £125,000 (around five times the average UK wage).
Even so, it demonstrates that "wealthy" Britons' placing in the international tax burden league table varies considerably depending on where the cut-off point for income is drawn. The estimates from UHY speak for themselves, but readers would do well to look more widely before drawing conclusions about the UK's relative tax burden.
Flickr image courtesy of Images_of_Money