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15 Jul 2003 : Column 215W—continued
Taxes and Benefits
Matthew Taylor: To ask the Chancellor of the Exchequer with reference to the document The effects of taxes and benefits on household income 2001–02, what percentage of gross incomes was paid in indirect taxes by income decile for (a) retired and (b) non retired households; and if he will make a statement. [124448]
John Healey: The information requested falls within the responsibility of the National Statistician. I have asked him to reply.
Letter from Len Cook to Matthew Taylor, dated 15 July 2003:
- As National Statistician, I have been asked to reply to your recent question asking for the percentage of gross incomes paid in indirect taxes by income decile for (a) retired and (b) non retired households. (124448)
- Estimates for indirect taxes and income are based on the analysis "The effects of taxes and benefits on household income 2001–02" produced by the ONS and published on the National Statistics website on April 11th 2003 and in Economic Trends in the May 2003 edition. The analysis can be obtained from the House of Commons library. This includes measures of income inequality for the United Kingdom as a whole based on data from the Expenditure and Food Survey (EPS). Due to the sampling variability of each measure, sample sizes are only sufficient to allow a breakdown to be given by quintiles for the ratio of indirect taxes to gross income, and not by decile.
- A retired household in the analysis of "The effects of taxes and benefits on household income 2001–02" is defined as one where the combined income of 'retired' members amounts to at least half the total gross income of the household. A 'retired' person is defined as anyone in the EPS survey who is over minimum Nl pension age and is 'unoccupied' or 'sick or injured but not intending to seek work,' or who describes themselves as 'retired'.
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- The following table shows the estimated indirect taxes as a proportion of gross income for retired and non-retired households in the UK for each income quintile where households are ranked by equivalised disposable income. The table also shows the lower bands of the equivalised disposable income quintiles, which have been calculated separately for the retired and non retired households. For example, the lower bound of the 2nd quintile for the retired households is the income below which one fifth of all retired households are estimated to lie and similarly for the non-retired households. Since indirect tax tends to be a higher proportion of income for lower income bands, using different quintile points for retired and non-retired households affects the relative percentages for each quintile.
- Estimates of indirect taxes are imputed using household expenditure given in the EPS. One drawback of comparing the incidence of indirect taxes on households at different levels of income is that, by whatever measure used, on average, recorded expenditure exceeds income apparently available for it by significant amounts at the bottom of the distribution.
- Income and expenditure data recorded in the EFS are not fully compatible because they are recorded in different ways. Indeed, measured expenditure exceeds measured income for households in the lower half of the distribution.
- There are a number of possible explanations for this. Some households with low incomes may draw on their savings or borrow in order to finance their expenditure. In these cases, expenditure is not being met from current income. Some types of receipts are not included as income in the EFS e.g. inheritance and severance payments.
- In some cases, the information given on expenditure is not consistent with that on income received, possibly because of timing differences.
| Household type | Boundary point between equivalised disposable income quintiles (£ per year) | Indirect taxes (as percentage of gross income) | ||
|---|---|---|---|---|
| Retired | Bottom | — | 26.2 | |
| 9,026 | ||||
| 2nd | 19.1 | |||
| 11,354 | ||||
| 3rd | 18.1 | |||
| 13,878 | ||||
| 4th | 17.3 | |||
| 18,465 | ||||
| Top | 13.0 | |||
| Average for all retired households | 16.7 | |||
| Non-retired | Bottom | 30.4 | ||
| 11,604 | ||||
| 2nd | 19.5 | |||
| 17,038 | ||||
| 3rd | 17.1 | |||
| 22,711 | ||||
| 4th | 14.1 | |||
| 31,321 | ||||
| Top | 9.9 | |||
| Average for all non-retired households | 14.6 | |||
Source:
Office for National Statistics, based on the analysis 'The effects of taxes and benefits on household income', published on the ONS website and in Economic Trends No. 594 May 2003.
Matthew Taylor: To ask the Chancellor of the Exchequer with reference to the document "The effects of taxes and benefits on household income 2001–02", (1) what percentage of gross incomes was paid in
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customs duties by income decile for (a) retired and (b) non-retired households; and if he will make a statement; [124450]
- (2) what percentage of gross incomes was paid in stamp duties on house purchases by income decile for (a) retired and (b) non retired households; and if he will make a statement. [124451]
John Healey: The information requested falls within the responsibility of the National Statistician. I have asked him to reply.
Letter from Len Cook to Matthew Taylor, dated 15 July 2003:
- As National Statistician, I have been asked to reply to your recent questions asking for the percentage of gross incomes paid in Customs duties (24) and additionally in stamp duties (25) by income decile for (a) retired and (b) non retired households. (124450, 124451)
- Estimates for indirect taxes and income are based on the analysis "The effects of taxes and benefits on household income 2001–02" produced by the ONS and published on the National Statistics website on April 11th 2003 and in Economic Trends in the May 2003 edition. The analysis can be obtained from the House of Commons Library. This includes measures of income inequality for the United Kingdom as a whole based on data from the Expenditure and Food Survey (EPS). Due to the sampling variability of each measure, sample sizes are only sufficient to allow a breakdown to be given by quintiles for the ratio of customs or stamp duties to gross income, and not by decile.
- A retired household is defined as one where the combined income of 'retired' members amounts to at least half the total gross income of the household. A 'retired' person is defined as anyone in the EPS survey who describes themselves as 'retired' or anyone over minimum NI pension age describing themselves as 'unoccupied' or 'sick or injured but not intending to seek work.'
- Customs duties are estimated from customs receipts and are allocated to households in proportion to expenditure data recorded in the EPS. Stamp duty on house purchases for owner-occupier households has been estimated in proportion to the hypothetical duty payable on buying their current dwelling (estimated from EPS data) multiplied by the probability of a household of that type moving in a given year (estimated from the General Household Survey).
- The following table shows the estimated Customs duties and stamp duties paid as a proportion of gross income for retired and non-retired households in the UK for each income quintile where households are ranked by equivalised disposable income. The table also shows the lower bounds of the equivalised disposable income quintiles, which have been calculated separately for the retired and non retired households. For example, the lower bound of the 2nd quintile for the retired households is the income below which one fifth of all retired households are estimated to lie and similarly for the non-retired households.
- Since indirect taxes tend to be a higher proportion of income for lower income bands, using different quintile points for retired and non-retired households affects the relative percentages for each quintile.
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- One drawback of comparing the incidence of indirect taxes on households at different levels of income is that, by whatever measure used, on average, recorded expenditure exceeds income apparently available for it by significant amounts at the bottom of the distribution. Income and expenditure data recorded in the EPS are not fully compatible because they are recorded in different ways. Indeed, measured expenditure exceeds measured income for households in the lower half of the distribution.
- There are a number of possible explanations for this. Some households with low incomes may draw on their savings or borrow in order to finance their expenditure. In these cases, expenditure is not being met from current income. Some types of receipts are not included as income in the EPS e.g. inheritance and severance payments. In some cases, the information given on expenditure is not consistent with that on income received, possibly because of timing differences.
| Householdtype | Quintile | Boundary point between equivalised disposable income quintiles (£ per year) | Customs duties (as percentage of gross income) | Stamp duty on house purchase(as percentage of gross income) | |
|---|---|---|---|---|---|
| Retired | Bottom | 0.2 | 0.4 | ||
| 9,026 | |||||
| 2nd | 0.2 | 0.2 | |||
| 11,354 | |||||
| 3rd | 0.2 | 0.2 | |||
| 13,878 | |||||
| 4th | 0.1 | 0.2 | |||
| 18,465 | |||||
| Top | 0.1 | 0.3 | |||
| Average for all retired households | 0.1 | 0.3 | |||
| Non-retired | Bottom | 0.2 | 0.4 | ||
| 11,604 | |||||
| 2nd | 0.1 | 0.3 | |||
| 17,038 | |||||
| 3rd | 0.1 | 0.3 | |||
| 22,711 | |||||
| 4th | 0.1 | 0.3 | |||
| 31,321 | |||||
| Top | 0.1 | 0.3 | |||
| Average for all non-retired households | 0.1 | 0.3 | |||
Source:
Office for National Statistics, based on the analysis 'The effects of taxes and benefits on household income published on the ONS website and in Economic Trends No. 594 May 2003
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