![]() ![]() ![]() However, the incidence of indirect taxes on expenditure – which they are levied on – is more evenly balanced the poorest one-fifth of people paid 19.2% compared with 17.1% for the richest one-fifth. However, indirect taxes (such as Value Added Tax (VAT) and alcohol duties) can be considered both regressive or broadly neutral the poorest one-fifth of people paid the equivalent of 27.1% of their household disposable income in indirect taxation, compared with 14.3% for the richest one-fifth of people. Overall, taxes and benefits lead to income being shared more equally after all taxes and benefits are taken into account, the ratio between the average household income of the richest and poorest fifth of people (£65,500 and £18,900 respectively) is reduced to less than 4.Ĭash benefits were most effective at reducing income inequality in FYE 2018, although their effect has diminished over the past seven years this partly reflects the fall in their value relative to incomes before taxes and benefits.ĭirect taxes (such as income tax) are progressive in reducing income inequality with the richest one-fifth paying 30.9% of their income in direct taxation, compared with 14.7% for the poorest one-fifth of people. The ratio of average household income of the richest one-fifth of people (before taxes and benefits) compared with the poorest one-fifth (£7,900) was 11.2 in FYE 2018, continuing the downward trend from 15.5 in FYE 2008. Before taxes and benefits, the richest one-fifth of people had an average household income of £88,200 in the financial year ending (FYE) 2018, based on estimates from the Living Costs and Food Survey.
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