Making a statement with tax transparency

How much do you know about how the Government spends your money? With fierce public debate about where savings can be made, who will win or lose from spending cuts and big figures grabbing headlines it's easy to lose sight of the fact that all that money comes from hard-working families. And many of them don't have a good overall picture of what the taxman is taking from them each year. That all looks set to change with the introduction of a Tax and Spending Statement, a surprise announcement leaked ahead of the Budget yesterday morning .

It's further evidence of the Government's commitment to transparency, offering every taxpayer a personal statement spelling out exactly how much of their income is paid to the state and what it is being spent on. We have always campaigned for greater transparency from the Government about how much of our money it takes in tax and how it then spends it so when Ben Gummer MP first proposed the idea of a tax statement a few months ago we gave our support.

The statement builds on ideas like those spelled out in our Lifetime Tax paper, which sought to interpret Government data to show the total amount of tax paid by average and poor households over their lifetimes .

Specimen statements prepared by the Treasury yesterday show someone on £25,200 a year sees £5,702.12 of their income go to the taxman in direct taxation. Of that, the biggest slice goes on welfare which accounts for £1,900.71, followed by £992.91 for health and £743.26 for education. Interest payments on the national debt account for £363.12, which is greater than the £329.08 for defence and more than double the £153.19 for the police.

But the Government could go further with these plans and do everything they can to make clear other amounts we all give to the taxman. By only showing spend as a share of the direct taxes you pay, the proportions and totals on the pie chart look better value than the total you pay if less-direct taxes are also included. The picture could look very different if the statement concept is extended to factor in VAT or Corporation Tax plus how a fuller range of taxes affect people’s living standards, as well as everyone's share of future taxes to pay the deficit. We created the Tax Buster app to demonstrate the effects of all of these taxes, and show the true cost of everyday items.

The statements are a welcome move as part of a drive to make the tax system more transparent.  We all need to be properly informed so that we can make up our own minds and decide whether we are getting proper value for money.  However there is still more to do if the statements are to truly give us an honest account of the real price we pay for public spending.
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