Cast off the burden and ride free: Robert Chote charts the history of a tax that has plagued citizens of the United Kingdom since 1799, but from which our contest offers a holiday of up to 10 years
Sunday 08 May 1994
He was not alone in his complaint. Despite reforms to lessen its impact on the well-off, income tax remained enormously unpopular and had to be abolished after the Battle of Waterloo in 1816.
Robert Peel reintroduced it 25 years later at a rate of 3 per cent, and it has remained in place as one of the most effective ways for Chancellors of the Exchequer to raise revenue for the government.
Income tax has grown steadily in importance in Britain and in most other countries. In 1872 income tax raised only pounds 7m compared to the pounds 47m raised by Customs and Excise from taxes on spending and trade. During this financial year, income tax should raise around pounds 64.4bn, compared to the pounds 73.9bn to be collected by Customs & Excise.
Public discontent about the growth and intrusiveness of taxes has thrown up a succession of folk heroes, from William Tell to Lady Godiva. The American War of Independence and the French Revolution were both triggered to a large extent by arguments over tax.
The rebels invoved in these conflicts would no doubt be horrified to discover the range of human activities in which tax-collectors take an interest in modern Britain.
For example, we pay taxes when we work, shop, buy a house, drive a car, make a profit, give money away and when we die.
By raising taxes from a variety of different sources, the Government disguises how much in total people have to hand over to it. This is a practical illustration of what Jean- Baptiste Colbert, Louis XIV's finance minister, famously described as the art of taxation: 'Plucking the goose so as to obtain the largest amount of feathers with the least amount of hissing.'
But Gabriel Stein of the Adam Smith Institute has made an admirable attempt to clear the fog. He has calculated that, on average, people in Britain have spent all the year so far working exclusively for the Government - and that they will continue to hand over all their income for at least another fortnight. Only on 24 May will we stop handing our income to Kenneth Clarke and keep it for ourselves.
This 'tax freedom day' is five days later than it was in 1993, reflecting the first tranches of tax increases announced by Mr Clarke and his predecessor in their Budgets last year. In 1965, tax freedom day was as early as 29 April, and in 1982 as late as 6 June.
If the Government raised enough from taxes to cover everything it spent - rather than borrowing pounds 46bn last year to make up the shortfall - then tax freedom day would be on 12 June.
But Britain does relatively well compared to most other rich industrial nations. In 1992 we worked for 142 days a year purely to pay our taxes, compared with an average for the European Union of 164 days. The Swedes worked for 196 days to pay their taxes, and the Germans 158, but the Americans needed only 121 and the Australians 118.
Taxes pay for government spending on goods and services - like defence, street lighting and schools - but also to help redistribute income and wealth from the well-off to the less fortunate.
In the early days of income tax it was paid by less than half a million people, with the number rising above a million only in the early 1900s. Even by the Second World War, a married couple on average earnings paid no income tax.
But following the decision to finance wartime government spending largely through higher taxes - and then the expansion of the Welfare State which followed it - the need for revenue had grown so much that the net had be spread much wider.
Most perniciously, taxes have been introduced that are disguised not to look like taxes at all. This is true of the television licence (which viewers have to fork out for even if they never watch the BBC - which the tax supports); and national insurance contributions, which operate in almost exactly the same way as income tax, but get nowhere near the same public and political attention.
Governments also tend to prefer taxes that produce a growing revenue as time goes by, so that usually they do not need to increase them explicitly to pay for higher spending.
The paradox for politicians and tax raisers is that people say they still want better and more expensive public services, they tell opinion pollsters that they would be happy to pay for it with higher taxes, but then they vote for the party which promises - if not delivers - the lowest tax bill.
So to have someone else pay your income tax for 10 years, with no impact on the services you receive, should be tempting indeed.
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