For those who argue people are overtaxed in the UK and will run away if rates aren’t cut

This table has just been published by the OECD and shows the "tax wedge" taken from employment earnings for all 34 OECD countries.

Richard Murphy is the founder of the Tax Justice Network

This table has just been published by the OECD and shows the “tax wedge” (the difference between before-tax and after-tax earnings) taken from employment earnings for all 34 OECD countries:

The OECD say of this:


Note then that this “wedge” includes employer’s national insurance – which most people do not appreciate is paid on their behalf.

The UK is at 32.3 per cent, well down the list.

Of course, that may also be why we have such a high deficit: we are undertaxing high earnings in particular.

But there’s no case for saying we’re overtaxed, most especially at high rates. That’s for sure.

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11 Responses to “For those who argue people are overtaxed in the UK and will run away if rates aren’t cut”

  1. Kathryn

    We’re barely any higher than the US? This really doesn’t make sense at all…

  2. OldLb

    So why are you worried about tax havens?

    That’s people running away to lower tax regimes.

    Either its not a problem, or it is a problem.

    Either way, we are over taxed. In particular taxes on employing someone. Just like taxes on fags, that kills jobs.

  3. Anthony Masters

    I believe the author is conflating a number of issues. The tax wedge is defined here as the difference between “total labour costs to the employer and the corresponding net take-home pay for single workers without children, at average earning levels”. As the author correctly notes, this difference includes employer-side National Insurance (NI) contributions.

    Firstly, it is erroneous to make claims about higher-level earners, that “we are undertaxing high earners in particular”, since this difference is specifically about the income tax and NI contributions made “at average earning levels”. The claim about taxation of higher earners may be true or false, but it cannot be made from this data alone.

    Secondly, it is also incorrect to draw conclusions about the overall tax burden from these figures, such as “there’s no case for saying we’re overtaxed”. The Guardian’s data-blog on tax finds in 2012-13, the UK government raised £154bn from income tax, £104.1bn from NI, £101.1bn from VAT, £39.8bn from corporation tax, £26.2bn from fuel duty, £19.9bn from tobacco, spirit, beer, cider and wine duties. There are other taxes levied, but direct individual income taxation (income tax plus NI) represents £258.1bn of the £593.8bn total tax take.

    Whilst the author is concerned with higher taxes on larger incomes, a low ‘tax wedge’ as defined above signifies either a tax system dependent on indirect taxation or progressive income taxes. Since these figures are for the direct taxes levied against average earners, we cannot conclude from these figures that our national deficit is caused by low taxation on high earners.

  4. OldLb

    Switzerland, New Zealand, Korea. Notice the tax rates?

    No doubt these are cess pits on the par with Somalia. After all, if the government doesn’t tax and provide, it will be a disaster.

    How can these countries provide services at rates almost half the rate of the UK?

    Or is it that the public sector in the UK is so inefficient they have to double the price?

    Or is it that we are being gouged and the public sector is pocketing the cash?

    How can you charge double, and still run up 7 trillion of debt?

  5. henrytinsley

    And high tax Germany is such a failure, as you know.

  6. OldLb

    You’ve missed the point.

    High tax – yes, you can spend like Germany.

    However, you can also tax like Switerland, New Zealand or Korea, and there isn’t a huge difference in the economies or the level of services.

    Why should the cost of services in the UK and Germany be almost twice the other countries? They do not get a Somalia level of infrastructure.

    What it means is that the UK and the German governments are overcharging their citizens for what they provide.

  7. OldLb

    All company taxes, are paid by people. It’s just that its indirect. Either the customers, the shareholders or the employees are being taxed indirectly.

    You need to add on the VAT, the fuel, the insurance premium tax etc, to get a level of how much we are taxed.In fact because of the first paragraph, its tax / number of taxpayers to get a real sense.

    Equally, spending per head, 11K is an interesting measure. Since that needs a salary of 40K to pay, it shows that a lot of migration is not beneficial. It also shows we are spending way more than we earn. Living above our means.

    Lastly, the debt per tax payer, pensions included, is well over 250,000, rising with inflation. With median wage at 26K, its clear what’s going to happen. The only question is how long.

  8. Anthony Masters

    I agree that tax incidence does mean that all company taxes are paid out of the wallets of human beings.
    The data in the article only deals with the direct taxation of average incomes, so the author cannot make claims about the overall burden of taxation or the burden on those of higher incomes.
    I also agree that government spending and taxation per capita are certainly better measures of government’s size than this specific ‘tax wedge’.

  9. LB

    So the argument put forward that we aren’t overtaxed goes like this.

    If we ignore all these taxes that people pay, they aren’t over taxed.

    Pretty pathetic bit of lying isn’t it?

    The real problem is the other huge lie about government debts.

    Namely they don’t report the pensions debts. Makes it all look affordable – maybe. Gives people the false security they will get something for their contributions. Given those debts are 500% of the borrowing figure, its not a case of won’t pay, its a case of can’t pay.

    That’s disasterous for most people

  10. MK

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  11. Aeomer

    It’s tempting to compare the tax regime of a supposedly higher taxed country to the UK and say we have it easy. The figures here only cover direct taxation. Because of the huge number of double and triple taxation points in the UK our actual tax wedge is 71.3%. That is for every pound you spend, 71.3p will go back to the government in some form of taxation. You may think when you buy a product from a shop the taxation is, generally, 20% VAT, but remember the cost of the item also includes all the taxation the shop and its employees have to pay, too. That’s around 51% indirect tax on the produce before the 20% VAT – and let’s not forget the income tax you paid before you received to money to buy that item.
    The article above is a perfect example of broken thinking and double talk by those with a vested interest in keeping UK taxation high.

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