18 May Why Are Taxes in the UK So High?
The amount of tax that people pay in the UK seems to increase year upon year. Granted, tax increases in the foreseeable future could be a reflection of the impact the covid-19 pandemic has had on the UK economy, but even before this, taxes in the UK continued to increase exponentially. This begs the question, why?
Unfortunately, when a country allows banks to create a nation’s money supply, it is the citizens of that county who end up paying higher taxes. This is due to the fact proceeds from creating new money go to banks rather than to the taxpayer. Additionally, in stark contrast, those same taxpayers are responsible for paying the cost of financial crises that are caused by the banks.
Proceeds from Creating Money
The Bank of England prints paper money and the cost of doing this is minimal. For example, it only costs a few pence to print a £10 note, meaning the government make a hefty profit on each bank note printed. The profit made on newly created money amounted to £18 billion between the years of 2000 and 2009. To put that into perspective, the same amount could cover the wages of over 90,000 nurses.
That being said, the Bank of England are only responsible for the creation of paper money, not electronic money, which is produced solely by banks. Within a similar period to the £18 billion generated by the printing of physical money, between 2002 to 2009, banks increased the amount of money in the UK by £1 trillion by lending. Every loan that the banks create generates new money and because they are the creators of that money, it is them who reap the benefits. The benefits in this instance would be interest received on the £1 trillion worth of loans.
National Debt Interest
The banks naturally make a substantial amount of profit on this money and because of the fact it doesn’t go to the government, the government have to borrow large amounts to make up for lost income. We, as taxpayers, are responsible for paying interest on all of the money that the government has borrowed.
When we pay taxes, we spend more on the interest on national debt than we do on the police, transport and defence. It works out at a total of around £1,700 per taxpayer per year.
There is no consideration in this exchange as taxpayers continue to pay interest on government debt but this money is not spent on public services, meaning taxes increase but the taxpayer doesn’t get anything in return.
Deficit: The Cost of Recessions
The amount of money the government has to borrow from banks also increases in times of crises and recessions. Take the financial crisis in 2008 where hundreds of thousands of people lost their jobs and businesses sales plummeted as the public spent less. All of this meant the government collected less tax.
Simultaneously, during this period more people went onto unemployment benefit, meaning the governments costs went up significantly. The gap between money coming in and money going out increased to £180 billion and this gap had to be covered by the government borrowing more money.
Paying tax can be an extremely complicated process, especially for businesses starting out, which is why more and more people opt to use Tax Advisors and Consultants when it comes to organising their taxes. If you would like more information on paying taxes that pertains directly to you or your business, contact Tom Griffiths here.