Poorest hit hardest by consumption taxes, new research shows
The poorest twenty per cent of households in Britain spend an average of £1,286 per year on ‘sin taxes’, including betting taxes, vehicle excise duty, air passenger duty, ‘green taxes’ and duty on tobacco, alcohol and motor fuels. In addition, they also spend £1,165 on VAT.
The £1,286 spent on sin taxes represents 11.4 per cent of the disposable income of Britain’s poorest fifth of households. For every eight pounds spent by the poorest fifth of households, one pound is taken from them in sin taxes.
Despite significantly lower rates of alcohol consumption and car ownership, the poorest income group spends twice as much on sin taxes and VAT than the wealthiest income group as a proportion of their income. Tax is the single biggest source of expenditure for those who live in poverty and indirect taxes are a major cause of Britain’s cost of living crisis.
The average smoker from the poorest fifth of households spends between 18 and 22 per cent of their disposable income on cigarettes. The tax on these cigarettes consumes 15 to 17 per cent of their income.
Motoring taxes absorb eight per cent of the income of a typical driver from the bottom fifth of households.
Alcohol taxes consume 2 to 4 per cent of the income of moderate drinkers in the bottom fifth of households.
People in the bottom fifth of the income stream who drink moderately, smoke and drive a car spend 37 per cent of their disposable household income on sin taxes and VAT. The comparable figure for people in the top fifth of the income stream is 15 per cent.
Halving ‘sin taxes’ on fuel, tobacco and alcohol, scrapping green energy subsidies and returning the rate of VAT to 15 per cent would reduce tax evasion, reduce black market activity, improve labour market flexibility and stimulate the economy. Above all, it would put money back in the pockets of those who are in greatest need of it.
The publication was featured in The Observer, The Daily Mirror, The Daily Mail, The Telegraph, City AM and LBC Radio.
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