· Tax
burden on one-earner married families 20 per cent greater than the
OECD average
· Struggling
families face highest effective marginal tax rate in western
world
· Income
tax burden 70 per cent more than a comparable French family, more
than twice as much as a comparable US family and 15 times as much
as that on a comparable German family.
· Government
must ditch plans to raise personal allowance and use money to boost
marriage allowance
The Chancellor is being urged to end the discriminatory tax
regime that penalises families when compared to the other OECD
countries.
New research, which is being launched
tomorrow in Parliament by
the social policy charity Care, lays bare the
alarming truth about family taxation in the UK.
The report, ‘The Taxation of Families –
International Comparisons 2016’, reveals that the tax
burden faced by one-earner married couples with two children on
the average wage is 20 per cent higher in Britain than the rest
of the OECD.
But the picture for British one earner married couples with
two children on 75 per cent average wage – those the Government
has described as the just about managing, face the highest
effective marginal rate in the developed world, a crippling 73
per cent.
This means that when such a family increase their incomes,
they will only get to keep 27 pence from every additional pound
earned. The rest will go to the government in tax, national
insurance and lost benefits.
Nola Leach, Chief Executive of CARE, commented: “The
Government has previously said that it wants to support those
families who are just about managing, but as our report shows,
this group is still being discriminated against, by a punitive
and unfair tax system. Astonishingly for those families on
between half and three quarters of the OECD average wage, the
marginal tax rates they face are the highest out of any country
in this group. The problem we have identified is that our income
tax system takes no account of family responsibilities - be they
to a spouse or children - placing this burden almost entirely on
the benefits system.”
Building on previous years, the report’s authors, tax
experts Leonard Beighton, Don Draper and Alistair Pearson now
include a chapter highlighting the ways different developed
countries share out the income tax burden between families and
singles.
It found that a one-earner married couple with two children
on average wage pays 70 per cent more tax than a comparable
French family, more than twice as much as a comparable US family
and 15 times as much as that on a comparable German
family.
By contrast the tax burden on a single person
with no children on average wage is 9% less than the OECD average
and 18 per cent less than the average for the 22 EU countries
that are OECD members.
Mrs Leach continued: “There is a disturbing individualism
in our tax system. Its treatment of one-earner families with
children on average wage is very unfavourable while its treatment
of single people with no family responsibilities on the same wage
is generous.”
The charity is calling on the Government to
ditch its plans to spend £4 billion on raising personal
allowances from £11.5 thousand to £12.5 thousand by 2020, but
instead focus this money on families with
children.
It argues that the best mechanism for this
would be to significantly increase the marriage allowance for
those with dependents, while moving towards a fully transferable
allowance for all married couples in future years.
Mrs Leach, concluded: “If the Government is serious about
helping struggling families, then it must act to reduce their tax
burden. The simplest way to do this in the short term would be to
use the billions earmarked for raising the personal allowance and
channel this into increasing the marriage
allowance.”
