Where Does It Go? – UK Money Blog £

Where does it all go? Well, tax wise at the moment, it goes into paying for bankers mistakes, with the Government, who are at least partly responsible for not foreseeing the problem in the first place, now bailing out the banks bad debts with your money.

And now it turns out that the Banks were not only guilty of mismanaging their business but avoiding paying their fair share of tax whilst they were making billion £’s worth of profit. Allegedly.

The Guardian recently found evidence that Barclays had been busy creating companies in low-tax countries such as Brazil and Luxembourg. Allegedly.

These documents were published on the Guardian website, only to have a judge phone up at 2am demanding they are taken down, and in so doing generating even more publicity around the story than would have happened.

This take down order has now been ratified by a judge, in a chilling blow for free speech in the UK.

The confidential leaked documents describe how SCM, Barclays‘ structured capital markets division, allegedly planned to use more than £11bn of loans to create hundreds of millions of pounds of tax benefits, via “an elaborate circuit of Cayman Islands companies, US partnerships and Luxembourg subsidiaries”.

The tax benefits for Barclays are said to be in the region of £1billion a year, although this is unverified.

And so, Techcrunch in the US, has managed to publish the documents, in solidarity for free speech around the world. Here is the information Barclays do not want you to see:

Barclays Confidential Tax Avoidance Documents

Alleged evidence of Barclays tax avoidance documents:
Barclays Tax Avoidance – Lux
Barclays Tax Avoidance – Knight
Barclays Tax Avoidance – Valiha
Barclays Tax Avoidance – Brazil
Barclays Tax Avoidance – Berry
Barclays Tax Avoidance – Faber
Barclays Tax Avoidance – Brontos

Carrying on with our series on where does your money go, lets use those figures from the post – How Much Money The Average UK Family pays in tax

That post concluded, after income tax and all the other tax such as VAT the average family pays £201.34 in tax. Bear in mind this is last years figures, now we own half the banks our public debt is a lot higher – we’ll cover that next.

But how much has been spent already? From the Guardian money wall-chart we can get a rough idea.

Of our money given in tax in 2007/2008:

• 18% to the Dept of Health
• 10.3% to Education
• 23.3% to work and pensions
• 21.3% for benefits
• 5% for debt interest – this is obviously going to be a lot higher in 2008/2009
• 6% to the Ministry of Defence
• 3% for transport policy
• 5% for Scotland
• 2.5% for Wales
• 1% for Northern Ireland
• 3.6% for Universities
• 3% for Tax Credits
• 1% to decommissioning Nuclear Waste
• 0.5% for Iraq/Afganistan Wars
• 1% to Policing

Using these figures, an average family earning £32,799 a year contributes, each week:

• £36 to the NHS
• £21 for our schools
• £47 for the OAP’s
• £43 for those on benefits
• £10 on the public debt interest
• £12 for the Army, Navy and Airforce
• £6 for the roads and rail
• £10 for Scotland
• £5 for Wales
• £2 for Northern Ireland
• £7.25 for Universities
• £6 for tax credits
• £2 storing nuclear waste
• £1 the Iraq/Afghanistan wars
• £2 for the police

Thanks to Burning Our Money who put me on to the Guardian chart showing how our taxes are spent by the Government – the full pdf can be seen here.

I’ll be pouring over this chart and looking to use it as a road map for investigation in coming up posts.

The name of the site is Where Does It Go, so here is a some information on where your money goes in regards to tax.

According to a BBC survey in November 2007, the average income for a family with 1.9 kids is £32,779, or £630 a week.

Assuming 22% tax (20% in 2008) this equates to a family paying £126 income tax a week.

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But we’re not only taxed on income, we’re taxed on our outgoings as well via VAT – using the VAT calculator I took some rough figures from the above graph to give a back of the envelope guestimate on how much we pay out in tax indirectly through spending.

We currently pay 0% tax on:

• food
• books, newspapers and magazines
• children’s clothes

And a reduced rate of 10% on:

• reduced rate
• fuel power
• energy saving
• residential conversions

Everything else is at standard 17.5%.

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As can be seen from the above BBC chart, the average spend per week for family – £601.20. Broken down I included how much we can expect to pay in tax for each area:

• Food – £60 – No tax
• Alcoholic drinks/ cigarettes – £15 – Tax: £1.50 (Source)
• Clothing – £35 – children’s clothes no tax; assume adults get £20 taxed at 17.5% – Tax: £2.50
• House fuel – £45 – Tax: £2.25
• Household goods – £40 – Tax:£5.00
• Health – £5 – Tax:£0.85
• Transport – £80 – Fuel tax of 80% (Source) – Assume petrol is £40 – Tax:£30
• Communication – £15 – Tax: £2.62
• Recreation – £80 – Tax: £14
• Education – £20, Assume they are books – No Tax
• Restaurants/hotels – £45 – Tax: £7.87
• Misc goods – £50 – Tax: £8.75
• Other – Mortgage interest, holidays, fines, licences – £105 – assume no tax

TOTAL: £75.34
TOTAL INCLUDING INCOME TAX: £201.34

I have tried to err on the side of caution in assigning rough figures, if you have suggestions for modifying this please let me know.

In conclusion: 31% of your money goes straight back to the government. How do YOU want it spent?

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Resources:

Learn more on VAT here
VAT calculator

September 2008 – What is all this talk about UK tax rebates, and does it affect you?

• 5 million low paid workers were losing out due to the abolition of the 10p tax rebate – this is roughly classed as all those who earn less than £17,000 a year.
• The rebate is the Government saying they got it wrong (after intense political pressure) and attempting to recompense, at the cost of around £2.7 billion to the country.
• The tax rebate will be given in your next pay-slip, or next year if you’re self employed when you declare your taxes.
• The rebate was done by changing how much taxable income you are tax free on – increasing from £600 to £6035.
• There are still losers – those earning £8-10,000 were to lose £200 a year from the new tax laws – the rebate should give back £120 so they will still be losing £80 compared to pre-budget.
• People earning from circa £17,000 to £40,835 gain from the rebate, as they were better off before anyway under the 10p tax rate abolition and now get the rebate on top.

Is this fair? What would you have done?

Resources:

Use a salary calculator to work out how much you will pay.