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What do the 50p tax rate and UK charitable giving have in common?

Two sets of tax figures have caught our attention in recent days. While diverse, they have interesting similarities.

The first is the Labour Party commitment to reintroduce the 50p tax rate if it is elected in June 2015. There seems to be no consensus as to how much tax this might actually raise if Labour is given the opportunity to put this commitment into practice.

The other set of figures relates to the value of charitable tax reliefs in the UK. The value of reliefs provided directly to charities is estimated at £3.3billion in 2013/14. The largest single component of this is rates relief at £1.63billion, followed by tax repayments of £1.1billion on gift aid donations.

Charitable tax reliefs are also given to individuals. Inheritance tax relief is worth an estimated £500million for 2013/14, while higher rate relief on gift aid donations is worth about the same amount. Taken together, charitable tax reliefs for charities and individuals for 2013/14 are estimated at £4.4billion which makes a huge and welcome difference to the effectiveness of the voluntary sector in the UK and internationally.

Now for the interesting similarities.

The Charities Aid Foundation reminds us that just 9% of the UK population contributes 66% of the time and money given to charitable causes. CAF call this group the Civic Core. The next 67% of the population provide a further 34% of donated time and money. This group is described by the CAF as the Middle Ground. The remaining 24% of the population do nothing. This is an extremely skewed distribution.

Almost as skewed as the distribution of income tax payments. Here the top 1% of earners (earning more than around £150,000 per annum) pays approximately 30% (£46.5billion) of the total annual income tax yield of some £155billion. The top 5% (earning more than £67,700) pay around 50% (£77.5billion) of income tax. The top 10% (earning more than £49,900) pay around 55% of all income tax, while the remaining 90% pay only 45%.

Some commentators are suggesting that the Shadow Chancellor’s commitment to the 50% tax rate is more popular in the eyes of voters than the Labour party itself. The ballot box will decide that. We don’t know whether the Civic Core are among the top 1% of earners. Nevertheless, whichever party wins the next election, they should remember that, in any skewed distribution, both the payment of tax and charitable giving come from individuals who do not have infinite resources. We are all human.

This was posted in Bdaily's Members' News section by George Bull .