Tax Change Needed?

With the news that SSE and Budget Energy are the latest suppliers announcing increased prices for consumers, family budgets facing even more strain. Northern Ireland is facing the perfect storm of Brexit, the protocol, wars, and inflation, which look set to increase the pressure on household budgets over the next few years. So, what can be done?

During the campaign some of our political parties have argued that every household should receive a one-off payment to help ease the immediate crisis. This payment would be like the ‘High Street Voucher Scheme’ that last year handed £100 to every person over 18. Clearly this would have a short-term effect and would help families over the next few months. But what about the long-term? How can we help families meet their increased costs going forward?

At CARE we have argued that one of the things that could help is a fundamental tax reform of income tax. This reform would ensure that families are treated fairly.

Unlike other countries, people are taxed in the UK as individuals not as households. In France, a household pools resources and are threat as one unit for income tax. In the UK, every person living in a family home is taxed separately, as an individual. This means that families pay more tax in the UK and the cost of raising children is never considered when income tax is paid.

A single person earning the national average salary of £30 000 a year is obviously better off than family of four, where the earning parent’s wage is also £30 000. However, there is an enormous difference in the cost of living for a household with four mouths to feed compared to one. Yet, both households pay the same amount in income tax.

This unfairness becomes even more apparent when we use the Government’s own statistics to compare the standard of living experienced by these two households. According to Treasury data, the couple with two children needs to earn £74,500 a year to achieve the same standard of living as a single person earning £30 000. Only 6% of taxpayers earn more than £70,000. For most families the income tax burden makes their lives a struggle.

Northern Irish families on low and middle incomes are taxed at greater rates than people without children, and face a much higher tax burden than families in many other comparable countries. For example, a family on median income in Germany pays no income tax. Yet in Northern Ireland, a family with two kids on £30,000 will pay a tax bill of £5936.  This leaves many of our families stuck in the poverty trap.

It is clear that that way we pay tax in the UK needs to change, yet this is not on the radar of any of our political parties in Northern Ireland. A one-off household payment, as many of our local parties propose, may help people get through the next winter, but a fundamental change in tax law is needed if we are to help families get out of poverty forever.

In the next Assembly term, CARE will continue for advocate for fairness for families.// Tim Cairns CARE Senior Policy Officer


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