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IFA View: The curse of taxation

Of every 100 you earn, you pay 11 per cent to the Government in National Insurance contributions and a further 22 per cent in income tax, or 40 per cent if you are a higher-rate taxpayer.

Let us assume that you spend the remaining 67 on the following: 8 for a few drinks; 15 on lunch with a friend; 10 on a new T-shirt; 15 on petrol; 5 on cigarettes; 6 saved for council tax; 3 saved for road tax and 5 saved to put towards the electricity bill.

Five per cent of the electricity bill is tax, as is 17.5 per cent of the 25 that you spend on clothes and lunch. The taxman also takes about 35 per cent of the cost of the drinks, 85 per cent of the cost of petrol, and nearly 90 per cent of the cost of cigarettes.

Finally, the Government gets all the council tax and road tax. Of your 100, you will have paid 65.97 in tax. If you are a higher-rate taxpayer this amount will be higher. And you cannot avoid tax if you save your money, as interest and dividends on savings are taxed.

Worse still, we have ignored a host of other taxes that you will have to pay, including capital gains tax, stamp duty, airport tax and insurance premium tax and inheritance tax.

The average person in the UK pays 50 per cent in taxes and many people pay far more than that. In 1789, Benjamin Franklin said: “Nothing can be said to be certain except death and taxes.” In 2005, I say: “There are three certainties in life – death, taxes and red tape.”

The levels of taxation today and the growth in public sector employment since New Labour came into power in 1997 have created a nanny state like no other in UK history. Public sector employees now make up 25 per cent of the workforce as opposed to 21 per cent when New Labour came into power. At least, 90 per cent of the UK adult population is on some form of state benefit, including public sector employment, or, if not, is entitled to it but not claiming it. Just think about it. Child benefit, public sector salaries, DWP benefits, state pensions, family and children’s tax credits and so on. The list is endless.

It is difficult to find anyone not on some form of state benefit. “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle,” said Winston Churchill.

Amazingly, New Labour keep taxing us to the hilt and keep getting re-elected. Unfortunately, we are mainly seeing that the taxes raised are being wasted, with little evidence of improvement in public services.

I recently visited the Passport Office as I needed a replacement passport in 24 hours. The overstaffing of the office, the “cannot do” atti-tude of the staff, the largely paper-based service and slowness were depressing.

Needless to say, I did not get my passport in the four-hour period possible because I had to provide a signed letter from my employer on company letterhead explaining the importance of the trip. I explained that it was my own business, that I was the employer and that I did not have any company letterhead on me. Having wasted three hours of my time, I did not getting the passport I needed.

This type of useless public service is being repeated all over the UK and we are paying dearly for it in high taxes.

Ronald Reagan once said: “The problem is not that people are taxed too little, the problem is that government spends too much.

“Public servants say, always with the best of intentions, ‘What greater service we could render if only we had a little more money and a little more power.’ But the truth is that outside of its legitimate function, Government does nothing as well or as economically as the private sector.”

Henry Brooks Adams (1838-1918) sums it all up when he said: “All taxation is an evil, but heavy taxes, indiscriminately levied on everything are one of the greatest curses that can afflict a people”.

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