If you think about the money in your pocket, the one thing that will be always in your mind, is that three letter word which always impacts on so much of our daily lives but when we compare our lives across the spectrum, we start to see a complete breakdown in our society because of the three letter word that is….
TAX
When you look at it, the word Tax impacts on what we earn, what we buy and how we live – meaning that we always paying tax.
But are we all being treated the same and being treated equally?
Which ever country you are in, you will all have Tax rules and this starts at work which is where the main issue is created. Before we discuss this, let’s look after this when the money enters our pockets – well our bank accounts actually!
So let’s break this nett money we have earned down and see where we are equal:-
- We come out of work and get into our car (or public transport) which had to buy and when you purchase it (well if you did brand new) you have to pay tax on it
- Then to move in your car or Public Transport, the fuel used to allow us to move is taxed
- When we arrive home we enter our home to which if we have brought, we had to pay a tax on
- When we are in our house, we have to pay a tax to live in it
- Whether it’s heat the place, light it, cook, use the phone or internet, these services we all pay tax on
- To live we need to eat and there again, depending on what we buy, food products can be taxed or if we are eating out, again we are taxed elements here too
- When we take care of ourselves with household, hygiene and clothes, again elements here attract tax too
- If we want to entertain ourselves, going out and again depending on what we do, certain elements mean we pay Tax too
So as we mentioned above, after earning our money, what we buy and how we live, we all have to pay tax the same and there is not a way for us to get out of this as the eight points above explain.
Whichever way you look at it, we are all equal and whether you like it or not, there is no way we can avoid tax and it hits us all, but are we all EQUAL?
We are after the money enters our bank accounts or pockets all equal but that’s where it ends – why?
Surely we all should be equal and pay equal tax on everything we earn – shouldn’t we?
You would think so, yet why doesn’t this happen?
With the rise of how Accountants diversified out of just being bookkeepers, we saw how they were able to work out that changes could be applied to the taxation system and applies allowances to the tax system which apply to individuals like they do to businesses. As a result, using these allowances, people are able to reduce the amount they pay in tax on their earnings. All this could be deemed as being reasonable and fair but is it really?
Surely, if we all work and get rewarded for it, shouldn’t we all still pay the same? So why should high earners be able to off-set items to allow them to pay less tax than the average worker. Too often if you equate tax to the pence in every pound paid, you will see that the high earners through allowances actually end up paying less tax than someone a low wage. Is this right?
Take cars for example, you’ll see that many people will use their cars and be able to claim to allowances against the use of their car yet the average uses their car to go work. Yes if you have a company car you get taxed on it but you can claim mileage allowances if you use your own car. Yet again, with some, through how you report things, you can off-set wear and tear and maintenance against your tax for using your own car but the ordinary worker who uses their car to go to work every day can’t claim the same allowances.
For many self-employed people/consultants, they can work alongside someone doing the same job but because they are effectively a contractor, they can use tax allowances to pay themselves differently and off-set many things which means they pay way less tax than the employed person they sit next too. Again, is this really right?
Whilst this is just a couple of examples, there are other ways accountants are using allowances to reduce their clients tax bills. Thus if you want to keep it simple (and yes we know that tax thresholds rise as you earn more), the issue with the whole system is that surely everyone should pay the same.
To the average worker who let’s say after the thresholds are taking account, pay close to the pence per pound tax bracket they fall into. Yet when you hit the £75,000, £100,000, £150,000 etc brackets, the pence per pound tax payment is much lower than the 40% bracket due to the way allowances are applied.
To the ordinary worker this is not fair, so why not make it a level playing field?
The time for transparency is here and if we are create a more inclusive society and make sure everyone is playing to level playing field. Yet to many including accountants and tax advisors the system is totally fair and doesn’t need to change.
But, aren’t these same industries over the 20 years plus that have been active is setting up, operating and advising on the use of Tax Avoidance and Tax Evasion Schemes? Whilst these used to be seen be acceptable, in some instances the authorities are now taking action against these schemes and in some cases, going back many years to seek repayment of the taxes not paid.
The use of schemes and allowances where senior management and business owners who earn more than their workforce but end up paying less tax than the combined workforce pay in tax, clearly shows that the system needs updating.
Until a Government is prepared to stand-up to these accountants and accountancy firms to make sure that these individuals actually play the level playing as the normal worker does, the taxation system will be the unfair and meaning that the country loses out on revenue is should be due.
A simple question or two to leave you with….
If say a footballer earning £1,000,000 a year is in the 45% tax bracket, do you really think he paid close to £450,000 in tax?
Or
Business owners who say £10,000,000 a year, do you think they actually paid £4,500,000 in tax?
Isn’t it time the system was changed?
If you have any thoughts or comments on this, please let us have your thoughts and whether you would allow us to use your comments in future blogs below:-