Impact of taxation on the richest and poorest households is set out in an Office for National Statistics report published today, which also looks at the impact of benefits on household incomes.
The effects of taxes and benefits on household income is an annual ONS publication and the new analysis for the 2009/10 financial year reveals that:
Before taxes and benefits, the richest fifth of households received income that was 16 times greater than the poorest fifth, compared with 17 times greater in 2008/09
After taxes and benefits, including benefits in kind, the gap between the richest and poorest fifth of households was to four-to-one, and income inequality was lower for retired than for non-retired household
On average households paid £7,200 in direct taxes, 20 per cent of their gross income
The richest fifth of households paid on average £19,500 per year in direct taxes, corresponding to 24 per cent of their gross income.
The richest fifth of households had disposable incomes that were six times that of the poorest fifth (£60,400 per year and £10,500, respectively).
Although households in lower income groups pay less tax than those in the top income bracket, indirect taxes such as Value Added Tax (VAT) take a higher proportion of the lower group's income.
The amount of indirect tax, such as VAT and duties on alcohol and fuel each household pays, is determined by how much they spend. On average the richest fifth paid two-and-a-half times as much indirect tax as the poorest fifth - £7,400 compared with the poorest fifth's £3,000 per year. This reflects higher spending by higher income households; the bottom fifth paid 25 per cent of their gross income in indirect taxes compared with 9 per cent for the richest fifth. The proportions were almost unchanged on a year previous when they were respectively 25 per cent and 10 per cent.
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