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Committee for Finance and Personnel Report (2007-2011 Mandate)

Research Paper: Briefing Note - Tax Rates in Northern Ireland: A UK comparison

Research and Library Services

Follow up Research

(Included in pack 30/05/07)

Briefing Note - Tax Rates in Northern Ireland: A UK comparison

 

A recent study by the “politically independent and non-profit” think-tank 1, the Adam Smith Institute, found that Northern Ireland is the highest-taxed part of the U.K 2.

The think-tank looked at the tax bills paid by residents of various regions, and translated them into a ‘Tax Freedom Day’ (TFD) 3, which they consider a good indicator of the scale of tax burdens 4. Inter-regional variations were analysed, and they found that Northern Ireland residents have to work four days more than the national average in order to fund their annual tax bills. The figures below indicate what they describe as the ‘postcode lottery nature’ of tax burdens:

RegionGDP (£bn)Revenue (£bn)Expenditure (£bn)Revenue (%)TFD (2004)

UK

£ 1,146,166 £ 451.3 £ 491.0 39.4% 27-May

England

£ 981,674 £ 388.6 £ 374.0 39.6% 27-May

Wales

£ 44,695 £ 16.6 £ 24.9 37.1% 18-May

Scotland

£ 93,509 £ 35.3 £ 45.6 37.8% 21-May

NI

£ 26,289 £ 10.7 £ 16.9 40.7% 31-May

North East

£ 38,885 £ 15.0 £ 21.6 38.6% 24-May

North West

£ 116,262 £ 45.9 £ 55.0 39.5% 27-May

Yorks&Humber

£ 85,767 £ 31.9 £ 38.5 37.2% 19-May

East Midlands

£ 74,904 £ 29.7 £ 30.2 39.7% 28-May

West Midlands

£ 92,982 £ 36.5 £ 39.6 39.3% 26-May

South West

£ 89,639 £ 35.5 £ 41.1 39.6% 27-May

East

£ 121,789 £ 45.4 £ 38.2 37.3% 19-May

London

£ 188,261 £ 76.4 £ 68.7 40.6% 31-May

South East

£ 180,470 £ 72.3 £ 41.1 40.1% 29-May

Source: ‘Taxes are a Postcode Lottery’, Adam Smith Institute, www.adamsmith.org

The table shows, that out of all UK regions, NI contributes the highest figure (40.7%), of tax revenue as a percentage of GDP. This is acknowledged by the Institute as ‘surprising’, (the trend is less interesting in the context of the wealthy South-East and London), and the buoyancy of tax revenues is attributed to recent growth locally. The think-tank suggests that the tax burden is still rising, and that more people are being hit by levies such as inheritance tax.

  1. www.adamsmith.org
  2. Scholars include the academic/author Dr Larry White, from the University of Missouri, who is a referee and contributor for more than a dozen journals (including the Journal of Money, Credit and Banking, the Journal of Monetary Economics and the American Economic Review) and academic publishers (www.umsl.edu/~whitelh/webcv.html).
  3. In other words, their measurement value was the number of days that residents had to work in order to pay off their annual tax bill – at which point their ‘Tax Freedom Day’ was identified.
  4. The calculations are sponsored by the West-Midlands based, independent financial advisers, Exclusive Finance

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