Stealth tax
Stealth Tax is a term used for a tax levied in such a way that is largely unnoticed, or not recognized as a tax.[1] Generally used in the UK by Conservatives to attack the New Labour government's policies. The phrase Stealth Tax should not be confused with double taxation or Privatization.
Origins
On 16 September 1996 the National Association of Pension Funds demanded a reverse to a tax on UK pension funds' dividends. Anne Robinson, their director general said pension funds are being "taxed by stealth".[2]
The exact phrasing stealth tax has been in British political use since 1998 and referred to tax rises that apparently circumvented the 1997 New Labour manifesto commitment that "over the five years of a Labour government ... there will be no increase in the basic or top rates of income tax".[3]
Anne Segall of the The Daily Telegraph claimed on 17 January 1998 that, "taxes will rise by £7 billion this year ... as a result of a variety of measures introduced or extended by the chancellor Gordon Brown. Mr Brown's 'stealth' taxes are directed mainly at middle-class voters and in particular at middle-class professionals and those with savings".[4]
On October 19 1998 Frances Maude, then Shadow Chancellor (the opposition finance minister) claimed the Chancellor Gordon Brown was imposing "stealth taxes ... designed to conceal their effect".[5]
Prime Minister Blair only makes occasional references to stealth taxes, such as 1 November 2001 in relation to Company Car taxation,[6] 9 November 2000 in relation to Fuel prices[7] and on 21 October 2002 in reference to Pensions.[8]
Examples
One example of a stealth tax is in the United Kingdom, where the British Government diverted revenue from the National Lottery to fund public spending.[9]
Another form is the sale of licences for the use of blocks of transmission frequencies which were previously used for public services, such as April 2004 UK 3G auction,[10] which costs 3, Vodafone, BT, One2One and Orange a total of £22,447,400,000 which they recover (by stealth) from the consumer over the 20 year contract period. The Ofcom Digital Dividend Review where TV frequencies are to be auctioned after the UK television digital switchover is complete will also raise stealth taxes.[11]
Stealth taxes might be recognised as taxation but remain largely unnoticed, as with Value Added Tax (VAT)[12] in the UK between 1979 and 1991, during which period it rose from 8% first to 15% (compensating for a large reduction in the higher and basic rates of income tax) then to 17.5% (when the Poll Tax was replaced by a council tax), somewhat shifting the burden of taxation away from income onto consumption.[13]
Taxation policy
Regressive stealth taxation
Stealth taxes can be viewed as regressive, as more affluent people are less affected by VAT, for example.[14] State lotteries may also be viewed as a form of taxation,[15] and there is evidence that they are played more by poor people than by the affluent.[16]
In January 1999 Conservative culture spokesman Peter Ainsworth described the National Lottery's New Opportunities fund as a "stealth tax".[17] and Conservative leader William Hague claimed The Labour stealth tax amounts to £1,500 for every working person.[18] In Parliament on 3 November 1999 William Hague accused the government of levying a £500 million 'stealth tax' that would hit IT companies.[19]
Increasing the stamp duty tax paid on house sales in the UK was also described as a stealth tax.[20] Michael Portillo claimed that the children's tax credit was a 'stealth tax on marriage'.[21] Conservative Archie Norman claimed that increasing the Council tax was This is the ultimate stealth tax hike - local residents foot the bill and local councillors take the blame.[22]
On 8 June 2005, revaluation of houses for council tax was put forward as a steath tax, Anne Milton MP asked Will the Minister guarantee that the average council tax bill will remain the same for my residents in Guildford, or will he come clean and admit that the revaluation is simply another opportunity to impose a stealth tax on hard-working families and pensioners?[23]
Progressive stealth taxation
Another view of stealth taxes is that they are progressive, when Tony Blair and Gordon Brown diverted money to the poor the transfer must be managed stealthily and with stealth taxes so not to upset the middle class voters.[24]
References
- ^ Oxford English Dictionary online
- ^ Pension funds urge Clarke to scrap dividend tax Richard Northedge, The Daily Telegraph 16 September 1996
- ^ The Labour Party's Manifesto 1997 BBC News Election 1997
- ^ Middle class faces £7bn tax hit Anne Segall The Daily Telegraph 17 January 1998
- ^ Maude warns of spending 'black hole' BBC News 19 October 1998
- ^ "LOBBY BRIEFING: 11.30AM THURSDAY 1 NOVEMBER 2001". 1 November 2001.
{{cite web}}: Check date values in:|date=(help) - ^
"Press Briefing: 11am Thursday 9 November 2000". 9 November 2000.
{{cite web}}: Check date values in:|date=(help) - ^ "Press Briefing: 11am Monday 21 October 2002". 21 October 2002.
{{cite web}}: Check date values in:|date=(help) - ^ The overwhelming case for paying stealth taxes Samuel Brittan, The Financial Times 25 October 1999.
- ^ 3G Mobile Spectrum Auction Radio Authority 21 July 2000
- ^ Caroline Spelman MP, Shadow Secretary of State for Communities and Local Government speaking on BBC Radio 4 "Any Questions" 19 January 2007.
- ^ Going Independent: The 'fiscal theme park' of VAT, Patrick Walker The Independent 26 February 2002
- ^ Value Added Tax on politics.co.uk 29 June 2005
- ^ Tax Policy: Ripe for Reform? Washington Post 28 April 1998.
- ^ State-Run Lotteries as a Form of Taxation, Alicia Hansen: The Tax Foundation 8 October 2005
- ^ Does The State Lottery Exploit The Underclass?, Greg Blankenship: Illinois Review 9 February 2006
- ^ New lottery fund 'not a stealth tax' Jamie Wilson The Guardian 30 January 1999
- ^ He's dead in the water The Guardian 7 May 1999
- ^ Wednesday in Parliament Ros Taylor The Guardian 3 November 1999
- ^ Caught in a global trap The Guardian 25 February 2000
- ^ Tories promise extra cash for under-fives Nicholas Watt The Guardian 20 February 2001
- ^ Increasing pressure David Brindle The Guardian 28 March 2001
- ^ House of Commons Anne Milton Hansard 8 June 2005
- ^ Cohen, Nick "Pretty Straight Guys", page 304. Faber and Faber, 2003.