Research finds:

• Tax burden on UK one-earner married families for 2011 was 42 per cent greater at average wage than for the OECD as a whole
• Coalition Government must act on its pledge within the Coalition Agreement to recognise marriage in the tax system through the introduction of a transferable allowance

New research, launched today and presented in Parliament to MPs and Peers this morning by the social policy charity CARE, reveals the alarming truth about family taxation in the UK.

The report, titled: ‘The Taxation of Families – International Comparisons 2011’, demonstrates that the tax burden faced by married couples on the average wage, where one parent stays at home to look after the children, is 42 per cent higher in Britain than the OECD average.

The research compares the differing income tax burdens for one-earner families (married couples and single parents with two children) across OECD nations. It reveals that UK income tax, as a percentage of gross wages, is greater than the OECD average at all income points considered. Furthermore, the disparity is greatest for low income families.

One-earner married couples with two children in the UK earning approximately £17,000 (£325 per week) pay 11.3% of gross wages in income tax, whereas their counterparts in other OECD countries do not normally pay anything. Those earning around £25,500 (£490 per week) pay 14.2% compared with the OECD average of 5.1%. Those earning around £34,000 (£650 per week) pay 15.7% compared with the OECD average of 9.4%.On a comparative basis, the income tax bill faced by UK one-earner couples with children on an average wage is significantly out of line with many other developed countries. For this group, the income tax burden is 67 per cent greater than the OECD average.

The report also highlights the UK’s extraordinarily high Marginal Effective Tax Rates, which show the amount of income tax, employees’ National Insurance Contributions and tax credits foregone on each additional pound earned. For one-earner families with children below average wage, these rates are three times as high as the average among OECD countries at the 36 per cent income point (UK minimum wage), and more than twice as high at the 50 per cent and 75 per cent income points.

Up to around £31,000, the UK rate is 73 per cent: a one-earner family with two children retains only 27p of each additional pound earned. The average OECD METR ranges from 26 per cent to 37 per cent at these income levels.

With the advent next year of the universal credit, the UK rate will rise to 76.2 per cent.

The figures demonstrate why it is even more urgent that Government act on its pledge, outlined in the Coalition Agreement, to recognise marriage in the tax system through the introduction of a transferable allowance.

This morning’s presentation of the research in the Houses of Parliament, will see a number of statements made, including:

Rt. Rev Dr Peter Forster, the Lord Bishop of Chester:

“If 50 per cent is too high a tax rate for the wealthy, why is 73 per cent thought to be acceptable for ordinary families? Effective marginal rates of tax are far higher in the UK than in other OECD countries, many of which have much lower tax burdens on families. If other countries can avoid such high rates, why can’t the UK?

We must all render to Caesar what is Caesar’s, but Caesar should not be asking a family of four or five to pay the same income tax as individuals who are responsible only for themselves. It is not a question of subsidising families, but of sharing the tax burden fairly according to people’s ability to pay. And Caesar should not be taking 73p of every extra pound that ordinary working families earn.”

Leonard Beighton, CARE Tax Consultant:

“Our newly published research shows that for many UK families, working harder doesn’t pay. In his Autumn Statement, the Chancellor claimed to be ‘on the side of those who work hard and want to get on.’ The figures tell a very different story.”

Alistair Pearson, CARE’s Fiscal Policy Consultant:

“The UK electorate was promised the most family-friendly policies in Europe. As far as tax is concerned, this is far from being the case.

A first step to solving the problems identified in our report would be the introduction of a transferable allowance for married couples.”

Download a PDF version of ‘The Taxation of Families – International Comparisons’

ENDS

For media inquiries, please contact Alistair Thompson of Media Intelligence Partners Ltd on Mob: 07970 162225 or 0203 008 8145, or Ruth Bessant of CARE on 020 7227 4731 or 075811 53693.

Notes to Editors:

About CARE:

CARE (Christian Action Research and Education) is a well-established mainstream Christian charity providing resources and helping to bring Christian insight and experience to matters of public policy and practical caring initiatives. CARE is represented in the UK Parliaments and Assemblies, at the EU in Brussels and the UN in Geneva and New York.