Tax planning news

Tax confusion for Brits

19 November, 2007

Taxes are everywhere and affect everyone in countless ways; as individuals, employees and business owners.

In a survey of over one thousand people, conducted by TNS on behalf of PricewaterhouseCoopers LLP, three quarters of those surveyed believe that national insurance contributions (NICs) are a tax.

The majority of respondents believe road tolls/congestion charges, charges made for rubbish collection and TV licenses are taxes, while just under half said passport fees and prescription charges are taxes. None of these items are officially constituted as taxes by the British government.

Leonie Kerswill, tax partner at PricewaterhouseCoopers LLP, said: “For effective dialogue between government and taxpayers, there needs to be a common understanding about what a tax is and what it is designed for.

“Although, officially, NICs are not a tax, it is clear that most people see them as one – though a quarter still accept them as contributions towards benefits, rather than realising that NICs go into the overall ‘tax’ pot. Road tolls are still rare in Britain, and separate charges for rubbish collection even rarer – but both are likely to become more prevalent and, with a general view that these are taxes, the government must be clearer in its communication with taxpayers about the purpose of taxes.”

Three quarters of taxpayers surveyed said that the British tax system is very important for raising money for spending on maintaining public services and ensuring a good regulation and judicial system. Under half think it is very important for the redistribution of wealth, while only one in three believe it is very important for encouraging better behaviour.

The findings suggest that there is some way to go to convince people that using the tax system to influence behaviour - ‘greener’ behaviour for example - is the right way to go, if indeed that is what the government of the day wants to do.

Leonie Kerswill, tax partner at PricewaterhouseCoopers LLP, said: “Given the current debate over green taxes, it is interesting to find that more people feel that the tax system plays an important role in wealth distribution than encouraging better behaviour. If the government wants to use the tax system to change behaviour then it needs to ensure that taxpayers understand what a tax is and what it is not.”