Taking the rise out of Council Tax
Filed under: Taxes
Councillors are meeting in the next few weeks to finalise how much our Council Tax bills will be for the coming year. Make no mistake they will rise. The Chancellor buried in his pre-budget report his intention to raise an extra £1bn from council tax next year.Bigger bills will help make council tax appear a more efficient tax. But really it is an horrendously expensive tax to collect.
Ten years ago, when I last asked for the info, it cost £309m to collect £10.9bn in council tax in England alone. It also cost £216m to pay out £1.9bn in benefits. The latest comparable figures are £339m to collect £20.9bn in council tax and £268m to pay out £4.2bn in council tax benefits.
Collection costs have only risen by 10% while the amount collected has doubled.
How much does it cost?
But let's look again. The real total collected less benefits was £16.7bn. And the total cost of collecting the tax and paying the benefits was £607m.To collect the tax cost 1.62p per £1. To pay out benefits cost 6.4p per £1. But the total cost of collecting and paying benefits to get a net income of £16.7bn is 3.63p for every £1 collected.
Arguably, the collection costs has to be knocked off the money used for council services so councils actually only get £16.1bn to spend, meaning it costs close to 4p to raise every £1 councils can spend.
How does it compare?
Comparing this accurately with other taxes is difficult. Most are collected by Her Majesty's Customs and Revenue (HMRC). Every year HMRC lists how much each tax costs to collect per £1 collected. Income tax, for example, costs just 1.16p per £1.But actually collecting income tax from the employed, through PAYE, costs just 0.79p per £1, whereas collecting from the self-employed, through self-assessment, costs 3.43p per £1.
And these figures do not take into account administering tax credits to the low paid. These cost a staggering 22.89p for every £1 paid out. The thing is, HMRC collected £153.5bn in income tax and paid out just £5.6bn in tax credits.
Is it any benefit?
So 20p in every £1 paid in council tax is paid back out in benefits but just 3.6p of every penny paid in income tax is paid out in tax credits. This also gives a net cost of collecting income tax, after paying out tax credits of 1.29p for every £1 collected.Whichever way you look at it, Council tax is an appallingly inefficient way of taxing people. Apart from international trade taxes and tariffs, which are more to do with international policies than revenue collection, the council tax remains the most expensive tax to collect per £1 collected (see table below).
- International Trade 6.15
- Council tax net of benefits 3.63
- Self-assessment (part of income tax) 3.43
- Tobacco 2.16
- Council tax gross 1.62
- Income tax net of tax credits 1.29
- Income Tax (overall) 1.16
- Capital Gains Tax 0.85
- PAYE (part of income tax) 0.79
- Corporation Tax 0.73
- Alcohol 0.69
- Inheritance Tax 0.64
- VAT 0.56
- National Insurance Contributions (NIC) 0.37
- Insurance Premium Tax 0.35
- Environmental Taxes 0.31
- Gambling Taxes 0.23
- Hydrocarbon oils 0.16
- Stamp Taxes 0.12
- Petroleum Revenue Tax 0.1
- Air Passenger Duty 0.06
- Overall cost of HMRC tax collection 1.05
- Cost of paying Tax credits 22.89
- Cost of paying Child Benefit and Child Trust Fund 0.89
That is expected to drop to £498bn next year.
Links (new windows)
Communities Dept statisticsHMRC report (see page 35)
Pre-Budget public finance report
Reader Comments (Page 1 of 2)
1-23-2010 @ 1:28PM
The Judge said...
It is typical and normal that with all the necessary rises in council tax, mortgage interest rates, taxation and national insurance, the working and middle classes will inevitably pick up the tab.
As usual if you are one of the many sponging bastards of society and have not worked for 10 years with no intention of working, you do not need to bother your head. Just have another hour in bed before you get up to go to the pub, because the social will pay for all your increases. your lifestyle will not be disturbed one little bit. makes you bloody sick that the morons of society can continue to breed in the knowledge that someone else will pay all their bills.
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1-24-2010 @ 11:25AM
brian said...
you get my vote! well put. it was nice for me see someone else feels the same. folk that work are far worse off than lazy folk on the dole. they get it far too easy and still bitch. they should try working for a living. i would go on the dole too but i would not know what to do with all the money!!!
1-24-2010 @ 12:19PM
Mtume77 said...
The Judge and Brian clearly arn't bright enough to even complete the mountain of paperwork needed to apply for the dole, or are just too lazy?
1-24-2010 @ 1:02PM
linda latimer said...
i agree they dont work they happy 2 stay at home get money from scocial go out at weekends plus they can buy alsorts they house or flats r better than ours plus the holidays they have 2 i think they should pay council tax
1-26-2010 @ 3:07PM
BobA said...
"The Judge" seems to have typed what I was thinking!!!!!!
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1-24-2010 @ 5:21AM
Kev said...
I agree with the judge! I was only thinking the other day how hard I have worked since leaving school, & what i have got to show for it, although my house is on a mortgage my estate is a mix of private/ council rent. I leave you to guess whoose got the better cars, have better holidays. This country is gutless, it panders to the wasters in life sooner than the people who are prepared to get off their backside, what a very poor country we have become
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1-24-2010 @ 7:21AM
martin said...
whats happened to all the money that the council put in iceland banks.and what about the money that the top council get. i suppose they want a extra pay rise this year
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1-24-2010 @ 7:56AM
MikeJ said...
Concil tax is no longer and hasn't been for many a year now anything to do with providing services. It's all about putting money into their pensions pot. As someone else said the Government are spineless, they see raising taxes as a further monies to pay themselves in "expenses" and we are going to continue paying for all the greedy people in central and local government from prime minister down to the junior clerk in the post room until we get real people to really represent the people of this country.
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1-24-2010 @ 9:18AM
Paul O said...
I agree with MikeJ, it seems that the councils are just out of control with no grasp of the real world that the rest of us have to work in to pay their wages. A big problem seems to be councilers and officials arn't interested in everyday things that matter like fixing pot holes but feel compelled instead to divert the money into hair brained projects as they preffer to point to these iniatives as proof of their go ahead attitude. Councils also use advisers, consultants and legal experts far too much, and they are paying their top men far too much as well, I think they need a wakwe up call by being told to manage with LESS as this might get them to concentrate on what matters to the public.
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1-24-2010 @ 9:20AM
Mtume77 said...
If its so easy, why don't you go on the dole and knock out a load of kids, instead of bitching on about other people? No doubt you would then just bitch on that the dole persecuted you and everybody else on the dole seems to have more money then you and can afford cars, foreign hollidays and luxury yauchts etc.
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1-24-2010 @ 11:05AM
richard said...
Council tax is treated by this Government as yet another tax that no longer has anything to do with the provision of community services.
It is my experience that the staff are well meaning and committed. They are led by overpaid and politically motivated flunkies who bow and scrape to their Central Government minders. It is these people who have caused the problems with the pension fund defecit.
An example of this was in Northumberland where the leader of the council received hundreds of thousand pounds pay-off only to receive another lucrative position in central Government.
Another 3 million pounds was then given to around 10 Senior Officers as a pay-off in an unncessary and undemocratic Council reorgansiation.
The MP expenses fiasco is the tip of an iceberg. Make no mistake this Government is fundamentally corrupt - and you and I continue to pick up the bill.
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1-24-2010 @ 12:22PM
Glen said...
I'm just glad that Labour's wacko idea of Regional Assemblies got booted out, we already have local councils, county councils Euro MP's and umpteen unelected Quangos that seem to be able to step in and out rule the rest. I think the more people in the chain the further the average joe is from getting anything done by them, also the more expences claims we have to stump up for. and no doubt the more super anuated "going rate"salaries and pension sceames to pay for on top of things.
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1-25-2010 @ 8:10AM
phill said...
yes but don,t forget who brought the council tax into force.
the good old torys.
so you have the tory people to blam for this.
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1-25-2010 @ 7:29AM
Rommell said...
Yes Phil the Torys may have bought the Council Tax in but it was reduced quite significantly to the old Rates system so get yiur facts right I am a bit peed off with yoy people who cannot think before you speak
1-24-2010 @ 3:39PM
Alan said...
This is not about who is working and who claiming dole money .This is about councils and their over the top wages +their gold plated pensions .We never get the service we pay for .Also the goverment are to blame for allowing far to many people into this country for the extra housing and service they get.Why not use the bonuses the bankers get and the MPs expenses to cover the extra cost .I think the people of this country have suffered far to much of this bloody extra cost due to greedy bankers and corrupt goverment.
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1-24-2010 @ 6:26PM
Glen said...
I agree Allen, from what I can remember councils that had a large student and seasonal population were the ones that had the most difficulty collecting the original poll tax and this deficit even caused problems with their council tax. Large influxes of foreign workers into an area must have the same effect, for one thing councils and police start hiring interpreters and creating liason officers all out of their existing budgets. I think foreign workers should be made to pay the equivelent of their stay in council tax before they come here. They will then have contributed into the pot they are happy to take out of, or their employer should be made to pay it in advance.The employers would find that foreign workers arn't so cost effective when they have to pick up the full tab instead of passing it on to the same British that are being undercut and made unemployed by them.
1-24-2010 @ 7:08PM
Hanna Kist said...
The unemployed don't have to pay council tax becouse last time it was tried they took to the streets and rioted bringing down the Thatcher Junta and causing such a run on Diocalm and Imodium Plus across middle England that even now despite how ever much the likes of you Boo Hoo there is still no government that is going to risk trying that one again. I suggest that if you don't want to pay council tax then you too take to the streets and riot. I was their in Trafalgar Square while you just bitch on AOL comments boards. so just run along and pay your increased council tax like a good little boy
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1-24-2010 @ 7:47PM
bart simpson said...
goto tpuc.orgWIRRAL COUNCIL – Admits that Council Tax is Unlawful and Sets a Legal Precedent.
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1-25-2010 @ 5:34AM
Paul O said...
What ever happend to Labour's promised review of the unfair Council Tax ? ...Nothing !!! This tax takes no consideration of the persons income and ability to pay so hits low paid and minimum wage workers worst of all while MP's can claim theirs back on their second homes. Shows you where the "peoples party's" priorities lie...with the priviladged as per normal.
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1-25-2010 @ 6:34AM
Rob said...
I feel the wealthy are still being allowed to get away with paying too little tax. This is because they are able to employ clever accountants who manipulate their wealth in a way which enables them to avoid the heavey taxes which the rest of us have to pay or else. For example I make around £12K a year gross. I have to feed both myself and my dissabled wife on that. Yet the Council tax for our 1 bed house is over £1200.00 a year. Yet we live in an area of Dorset with virtualy no amenities, not even street lighting. So how come wealthy people earning £100K and living in 5 bed houses in town are getting away with paying only marginaly more Council Tax ?. Their council tax band is higher yes, and theoreticaly they should pay more, much more. But as I said they have clever accountants who help them to avoid it and Its not right !!.
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