UHY Hacker Young report finds UK economy over-taxed

According to research by UHY Hacker Young, Top 50 firm, the UK economy is paying way over the global tax average. Britain has a tax burden of 18% above everyone else around the world.

So yes, it is fair to say that we are somewhat over-taxed as a nation.

The high effective rate of 32.9% GDP could well be meaning that our growth could be in jeopardy; the global average is 27.8% of GDP. The US is at 25.4% GDP and Ireland is at 28.3% - even Japan come in at 29.5%.

In saying this, many of our European counterparts also have high tax burdens, with most coughing up around 40% in tax.

The report by UHY Hacker Young warned that such high tax can put off investors, which has knock on effects when it comes to large corporations choosing to locate their bases outside the UK where the tax burden is lower.

UHY Hacker Young tax partner, Roy Maugham, said;

"While our tax burden compares favourably with some of our Western European neighbours, increasingly, that is not where the most intense competition is coming from. It needs to be a clear ambition to make our economy globally competitive by keeping a close eye on the overall tax take - perhaps even setting a specific target.

"That will need to be balanced by greater efforts to ensure that spending on the public sector delivers the best results for its customers.

"How much tax is too much ought to be discussed much more openly during the election campaign."

What do you think of the latest report? Are we running the risk of falling behind with the rest of the world due to our high taxes? Let us know your thoughts @OmnitasTax & join in the conversation on Facebook – with the General Election only weeks away, the debate is certainly sure to be a lively one!

Unemployment down and inflation declining but real-life wages are falling…

Unemployment figures down

According to a recent report by the British Chamber of Commerce, things – on the face of it – are

looking good for the UK economy.

In the three month run up to August last year, unemployment fell by 154,000; this is the first time since 2008 that these figures have been under the two million mark.

The latest QES also reported that there has been an improvement in employment balances for the services and manufacturing sectors.

All in all, the latest UK job reports do confirm that the market is a “source of strength for the UK economy”.

Inflation decline

It is also a fact that CPI inflation dropped 1.5% in August 2014 from 1.5% to 1.2% in September – this represents the lowest rate since September 2009 and is the ninth successive month that the Bank of England’s inflation target has been beaten.

Sea fares, air fares and a general fall in transport costs and lower prices of general recreational goods have been large contributors to the inflation drop

The latest QES does suggest that higher inflation could still be a risk as price rises are expected going forward.

Fall in real wages

Despite the inflation drop in September, the price rises around us continue to surpass earning growth – hence the “real wage” continuing to drop.

The CPI inflation reading in September was 1.2% - this is almost double the latest overall pay rise figure of 0.7%.

Because of this, in real terms, average earnings are actually falling by 0.5%.

Around two thirds of UK economic growth is dependent on consumer spending, so if the real wage growth decline trend continues, this could represent a real risk to the recovery of our economy.

Are you concerned about the economy or is your business doing well post-recession? Whatever your query, Omni Chartered Accountants are here to help – contact us today and let us know your thoughts on Facebook and Twitter!