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News & views

Annual tax summaries introduced

[5 Nov 2014] In a move being touted as the last word on clarity concerning UK Government spending, twenty-four million people will soon receive letters showing where their income tax goes. The personalized ‘annual tax summary’ will include pie charts covering spending on such areas as welfare, health, education and foreign aid.

Someone on a salary of £30,000 will see that £1,663 of it goes on welfare, £1,280 on health, £892 on education, £822 on the state pension and £475 on national debt interest. Whitehall insists the summaries are designed ‘to make tax more transparent and easier to understand’, with the Chancellor of the Exchequer declaring it to be a ‘revolution in transparency’. There will also be an online calculator enabling people to estimate their tax bill and see what it is spent on.

The Trade Union Congress has condemned the move as ‘politically motivated’, while the right-leaning Taxpayers’ Alliance has applauded it as a way of showing people what really happens to their taxes.

The summaries risk misleading the public because they will give only a partial view of where taxes are spent. They won’t include details of where the vast sums collected in value added tax, stamp duty land tax and excise duties on alcohol and tobacco go. Such refinements may be added later.

When the summaries appear, we’ll be looking closely at how far they fulfil the ‘transparency’ claims.

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