A new report inquiring into family life in Britain indicated that married British couples on modest incomes pay a third more in tax than their counterparts in other countries.
The detailed report, produced by CARE, a Christian social policy charity, says that after a period of fierce political debates about marriage and the tax system, the public can now see the extent to which middle income families are financially penalised by the Government’s refusal to recognise marriage in the tax system.
A single earning married couple who earn up to £33,000 a year, pays almost one third more tax in the UK than the average tax payable in the 30 countries of the OECD (Organisation for Economic Co-operation and Development) – an international organisation of 30 high-income economy countries, and 18 per cent more than the EU average.
There are two and a half million such families in Britain. In the US, a single earning married couple pays 48% of the tax paid by a single person with no family responsibilities. But a comparable couple in the UK pays 75 per cent.
(Click here to read the CARE’s summary of the report)
The report points out that coming off benefits and into work means the marginal tax rate will actually be 70 per cent because of the loss of Tax Credit. The loss of Housing Benefit and Council Tax benefit means the figure can be even higher.
Don Draper, one of the authors of the report, said:
'The UK is in line with most other OECD and EU countries when it comes to tax rates, with the glaring exception of single-earning married couples with children – who are hit much harder.’
Co-author Leonard Beighton also commented:
‘The tax system does not recognise the family unit. It sees taxpayers as individuals, regardless of their family circumstances. This is immensely damaging to the social fabric of the country and must be addressed by an incoming government.’
Dan Boucher, CARE's Director of Parliamentary Affairs, said:
‘The failure of the UK tax system to recognise family responsibilities makes it one of the most individualistic tax systems in the world. It is imperative that the next government addresses the current anomaly so that single-earner married couples on average incomes with children are not penalised as at present.
‘Far from constituting a ‘marriage bribe’ as was suggested recently, the introduction of the Transferable Personal Allowance – so a non working partner can transfer their tax allowance to their working partner – would actually help address a socially destructive inequality in the UK tax system.
‘The current failure of the tax, and indeed tax credit system, to take proper account of families is damaging family life and trapping children in poverty,’ he concluded.
The report comes as the Conservatives and Labour exchange blows over tax breaks for married couples. David Cameron has made recognising marriage through the tax system one of his party’s flagship policies ahead of the General Election. He was urged by Ian Duncan Smith to stagger tax breaks for married couples as he declared the ‘message matters more than the money’.
However, it was claimed that the poor state of the public finances means the policy is unlikely to be in a budget of Conservatives immediately after the election.