Have you ever wondered how much tax you truly pay? In order to do the calculation, VAT, national insurance contributions from both employees and employers, property taxes, various goods duties, council taxes, motor taxes, fuel taxes, cigarette taxes, environmental levies and a host of others need to be added to the more widely known income tax.
Fortunately the Adam Smith institute calculates this for the average Briton, and presents it as “tax freedom day”, which can be found here:
Currently the answer for the average Briton is that he spends just over 40% of his time working for the government and 60% for himself.
However, imagine you’re an industry that the government doesn’t like too much. As a tobacco, alcohol, energy or energy-related enterprise, the government sees you (or at least can paint you) as being responsible for a wide variety of social ills – cancer/alcoholism/global warming. But how far would it really go in raising taxes from you as a justified measure for all the pain it believes you cause?
In its latest earnings announcement, the UK pub operator JD Wetherspoon stated the following:
In the period under review, Wetherspoon made profit after tax of £22.1 million, but total taxes paid to the government were over £220 million, including VAT of £95.1 million, excise duty of £57.5 million, PAYE and National Insurance of £32.9 million, property taxes of £20.6 million and corporation tax of £11.1 million. This and the previous government have zealously increased taxes and regulation for pubs to levels which are, we believe, unsustainable. This has greatly increased the price of drinks in pubs and has widened the price gap between pubs and supermarkets, with a predictably huge increase in sales volumes for supermarkets, combined with a decrease in sales for pubs. The situation in Britain is in marked contrast to the approach in France, for example, where excise duties are far lower and where VAT, in respect of food in bars and restaurants, has been reduced to 5.5%. This has produced an increase in taxes and jobs for the French economy, through a reduction in the black economy and greater PAYE and corporation tax receipts. In contrast to previous decades, Britain has now become a high tax and regulation environment for business, with the effects of this being seen in many thousands of closed pubs and other small businesses across Britain, as well as a marked increase in unemployment.
Of course the government can get away with this extreme taxation because in addition to its implicit claim that pubs are responsible for alcoholism, the nature of their business means that pub groups cannot take their business offshore. They are fixed to the UK and therefore sitting ducks. The government can squeeze the life out of this industry and there is nothing the owners of these businesses can do about it.
The lessons to the businessman wanting to escape government persecution are:
- don’t be unpopular with the government; and
- don’t engage in any activity that you cannot threaten to take elsewhere.
Meanwhile, those of us who enjoy a quiet afternoon in our local country boozer are forced to pay for it through higher prices and less choice as lovely old pubs with hundreds of years of history close each year.
A business owner who pays his staff as per the law faces effective marginal tax of 50% on his income, 13% on employers NI, 20% on the vast majority of goods and services he spends his money on before you add in any other indirect taxes. Suffice it to say, this person works from Jan to Oct for the State and has two months for himself and his family.
The ASI tax freedom day is an aggregate measure and whilst helpful, could be better by splitting out what type of actual workers pay what percentage of the overall tax burden as they can be very different.
Yes, marginal tax rates are very important. In Ireland those who pay higher rate income tax pay a marginal tax rate of 68% when all the factors are considered. (Income levy 2%, national insurance 4%, income tax 41% and VAT 21%).
What’s important about these marginal rates is that they affect the motivation of the most able and productive in the economy. If they are high then leisure is comparatively more attractive than working more hours.
To The Inimitable Mr. Baxendale,
There comes a point in every person’s life to recognize they must make a very serious choice. Some do … the vast majority (from cradle to grave) will not make this serious choice and never will. Some people you might know have made this choice. I’ll bet you know some of them! Roger Moore? Ringo Starr, et al.? Keep your hands out of my pocket Mr. Taxman … or else! Capital flees.
Rich, productive individuals (much like yourself) sometimes grow tired of “taking it in the shorts!” They make a serious decision. THEY LEAVE! They stop making excuses … “if only!” They leave the jurisdiction whereby “legalized plunder” is taking place and if it becomes necessary to step further to procure freedom, liberty, privacy etc., they impose the ultimate solution: they renounce citizenship to the offending collective. They stop honoring the state, as subjects, to become freemen. They break from the chains of government propaganda and tribal inculcation. It can be done. I know.
I’d impone that the nation-state(s) (Especially those states deeply into statism, collectivism, socialism, debt etc.) offering little if any real chance for venerable, real and truly free markets to rise forth in your lifetime or that of your successive future generations … are places to be FROM! You’ve heard, “Life is too short?” I’ll bet you have! The “Collective” has, through state-run schooling institutions, stripped individuals to the core, thereafter creating a confederacy of “voting booboisie” that continue to elect masters to power on the whim that some where, “There’s something in it for me!” Dupes!
Government is unadulterated force. To be mystified by any other belief is poppycock! To be a member of ANY collective is to submit to the master’s lash and carry the burden of the master’s yoke of exaction (taxes), watching redistribution of wealth while “hoping things will change!” Things will change … government will dig ever deeper into the pockets of the subjugated increasing the wards of the State! To argue with this historical fact of truth is to bury one’s head in denial. And so it goes… Some do and the vast majorities of this world don’t. (Good thing!) Making the choice in this world to live one’s life, as freely as is possible—without the encumbrances of the collective is a noteworthy cause, exemplifying individuality. Some do … and some don’t. Well, that’s my two-cents worth, as a freeman … for all that it’s worth. Good day and the very best to you Mr. Baxendale.
Principauté de Monaco
UTC +2:00 CET
“Anyone who needs to be persuaded to be free, doesn’t deserve to be.” ~ L. Neil Smith
Good Evening Capt A,
Always a pleasure to here from you. I am sitting in a warm location outside my homeland just dicussing with the good lady Mrs B, after the kids are all at senior school, can we not think about becoming citizens of the world? Not long to go, but working from 1st of Jan to 30th of September for others , does not float my boat!
Yours in Liberty!
Where and from whom do you hire your employees?
“What do you mean?” I hear your inner monologue shrill!
“I hire them using agencies, jobs websites and newspapers/periodicals – I hire them freely on the open market and in a mutually beneficial manner with both parties being satisfied with the initial exchange.
Oh no you don’t! You hire your employees from the Government. In return you have to pay for them with Income Tax, Employee’s and Employers National Insurance (although technically you deduct both from the employee’s would be salary/wages).
It’s like the conversation between Young Vito Corleone and Don Fannucci. Where Fannucci want to dip his beak over a third into Young Vito’s ill gotten gains, only this scenario has a happy ending resulting in Fannucci’s (the Government) demise via a hot towel. Vito realises he is just swapping one set of gangster bosses for another should he go to the police/politicians. How times don’t change.
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