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British Tax Payers Confused About Taxes

by Jason Gorringe,, London

22 November 2007

A recently conducted survey of over a thousand people has highlighted confusion amongst the British population as to what constitutes a tax, revealing a need for a clearer explanation of the purpose of taxes, and how revenue is used by government.

The survey, which was conducted by TNS on behalf of PricewaterhouseCoopers LLP, showed that three quarters of those participating believed that national insurance contributions (NICs) are a tax.

The majority of respondents believed that road tolls/congestion charges (75%), charges made for rubbish collection (71%) and TV licenses (60%) are taxes, while just under half said that passport fees (48%) and prescription charges (47%) are taxes.

None of these items are officially constituted as taxes by the British government.

Leonie Kerswill, tax partner at PricewaterhouseCoopers LLP, observed that: "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."

She continued:

"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 (76%) of the taxpayers surveyed felt 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 (41%) thought that it is important for the redistribution of wealth, while only one in three (34%) believed that it is important for the encouragement of 'desirable' behaviours.

These 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.

Ms. Kerswill concluded by stating that:

"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."

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