An odd tax question
Discussion
Hmm there need to be a few assumptions made here, but briefly:
1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
Edited by DavidHM on Monday 21st June 23:51
DavidHM said:
Hmm there need to be a few assumptions made here, but briefly:
1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
Does anyone else think thats kind of scary?1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
Edited by DavidHM on Monday 21st June 23:51
I would exclude from that rather long winded list all those taxes that the business had to pay that had nothing to do with the actual sale of your particular TV.
However, it does highlight the extenet to which taxation of some sort or other is a feature of virtually every financial transaction.
What people often don't realise is that taxation is not based on real financial wealth creation, but on money movement.
However, it does highlight the extenet to which taxation of some sort or other is a feature of virtually every financial transaction.
What people often don't realise is that taxation is not based on real financial wealth creation, but on money movement.
Eric Mc said:
I would exclude from that rather long winded list all those taxes that the business had to pay that had nothing to do with the actual sale of your particular TV.
Which are those? The model makes a few assumptions but deliberately ignores the shop's fixed costs and any taxation payable on those, assumes that all profits are reinvested (admittedly without any applicable reliefs) and assumes that payroll is a fixed rather than vairable cost.It's debatable as to whether the purchaser's payroll taxes should be included but that was in the original question.
I do agree though that taxation focuses on transfers, rather than wealth, because they are so much easier to track.
DavidHM said:
Hmm there need to be a few assumptions made here, but briefly:
1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
+ when he plugged in his newly acquired TV, he electrocuted himself, so there is also Inheritance Tax to add.1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
Edited by DavidHM on Monday 21st June 23:51
Wings said:
DavidHM said:
Hmm there need to be a few assumptions made here, but briefly:
1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
+ when he plugged in his newly acquired TV, he electrocuted himself, so there is also Inheritance Tax to add.1. You are a basic rate taxpayer and you've paid for this out of overtime and therefore none of your personal allowance is attributable to this. Working the overtime has also had no effect on your entitlement to tax credits.
2. You've driven 10 miles each way @ 30 mpg.
3. The TV was made outside the EU and imported.
4. The TV shop had a gross margin of 20% once import duty was paid;
5. The TV shop is a large company and has made a net, taxable profit of 4% on the VAT free price.
6. The sale of the TV didn't lead to any capital gains by any shareholders of the companies involved in the sale and no dividends were paid out.
7. No TV shop employees earned any commission and so their liability to income tax and NI was unchanged.
1. Income tax/NI £1k net = £449.28 tax and employee's NI;
2. 10 miles each way @ 30 mpg @ £1.15/l = 73p of fuel duty and tax. You used 3.0267l, paying the government £2.21 in tax to do so. You also had to earn the money to pay for the fuel, generating another £1.56 in income tax and employee's NI.
3. The TV shop had to pay VAT, as you are not VAT registered, in the sum of £148.94;
4. Import duty amounted to £83.61 @ 14% of £800 less VAT;
5. Corporation tax amounted to 28% of 0.04 x £851.06 = 0.28 x £34.04 = £9.53
6. Your employer also had to pay 12% employer's NI on your earnings, a further £174.52
This means that the economic activity leading to the creation of wealth of 1 £1k TV was £1,628.83. Of that,
£449.28 + £1.56 + £2.21 + £148.94 + £83.61 + £9.53 + £174.52 = £869.65 went to the government in tax.
Edited by DavidHM on Monday 21st June 23:51
I mean, you could go on forever on this vein if you wanted to.
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