Wealthy pay more as number of adults paying tax falls
An analysis of the tax system by the Institute for Fiscal Studies (IFS) shows that the number of adults paying tax has fallen while the wealthy are paying a greater proportion of income tax. The percentage of adults paying income tax has fallen from 65.7% to 56.2% between 2007-08 and 2015-16 while the proportion of income tax paid by the top 1% rose from 24.4% to 27.5%. The increase in VAT from 17.5 to 20% was a revenue raiser but revenues from indirect taxes such as fuel duty have fallen. Meanwhile, corporation tax policies between 2010 and budget 2016 (including those that are due to come in before the end of the parliament) have resulted in a revenue cost of £10.8bn a year in 2015-16 terms. Researchers said attempts to broaden the base and crack down on avoidance and new taxes on banks have not been sufficient to outweigh the cost of cutting the corporation tax rate from 28% to 17%. The IFS said it was not clear if there was a “coherent overarching strategy” regarding tax and that more consideration “should be given to whether, and if so how, the banking sector should be taxed differently from other sectors.” They warned the Treasury that even though taxes are expected to recover, “the risks to revenue streams are currently larger than usual”.