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UK tax system and the Mitt Romney scandal

Much has been made of Republican presidential candidate Mitt Romney’s casual writing off of 47% of the American population as parasites who pay no income tax.

Mitt Romney’s gaffe has got taxback.com thinking this morning about the state of affairs in the UK, so we have crunched some numbers for you.

Per the Institute of Fiscal Studies, total UK government receipts were £588.6 billion in 2011/12. This is equivalent to roughly £12,000 for every adult in the UK, of which there are about 50 million.

Income tax is the single largest earner for the UK Government, making up 26.8% of total revenue. Income tax is charged on salaries from employment, on rental income from properties let out, on interest from banks and building societies, on dividends from companies and on the profits of the self employed.

National Insurance contributions (NIC) are the second largest earner and make up 17.1% of total government income. National Insurance contributions are generally paid by both employers and employees on earnings from employment, although NIC is also levied on self employed persons on the profits of their trade.

Of the 34.1 million people of working age in the UK some 30.1 million pay income tax and NIC, leaving just 12% not contributing. So, it seems that a far greater number of Britons chip in to the Treasury than our stateside counterparts

BUT as we all know, statistics can be massaged to portray a particular picture. For example, consider if you looked at income tax ‘contributors’ in terms of the total UK population of 62 million (including children etc!) – that would make for a headline grabbing, but totally misleading, economically inactive 48%.

Romney’s calculation seems to have been based on a strange denominator of the ‘electorate’ and included groups such as the elderly. As such, this was a particularly flippant analysis to make. One can only assume he was enjoying his $20,000 a head private 'donor' dinner so much that he made this slip, because as strategies for winning votes go, inaccurately condemning half the electorate as freeloaders dependent on federal government help – including millions of pensioners and veterans who receive benefiters – is certainly novel.