UK: CAN'T PAY, WON'T PAY, MUST PAY.

UK: CAN'T PAY, WON'T PAY, MUST PAY. - We've been taxed in all manners of ways - on cattle, land, dogs, servants, even windows. Today's system may be simpler, says Rhymer Rigby, but the rates are still historically high.

by
Last Updated: 31 Aug 2010

We've been taxed in all manners of ways - on cattle, land, dogs, servants, even windows. Today's system may be simpler, says Rhymer Rigby, but the rates are still historically high.

Julius Caesar noted that the natives of the island lying north of Gaul subsisted upon the flesh and milk of their cattle - or, as he wrote, 'lacte et carne vivunt'. The Britons, along with the Roman Empire's other subjects, were taxed accordingly.

This first recorded British tax, known as the scriptura - after the collector's inscription denoting the number of cattle an individual owned - typically ran at 10%. As hard currency was often in short supply, payment was usually made in kind - much to the inconvenience of those living far from the tax collector: transport was often costlier than the tax itself. Unsurprisingly, the scriptura was deeply resented by the Britons and probably a factor in Boadicea's first-century revolt.

Little is known of taxation in the Dark Ages, though it is likely that the Crown received tribute from the nobility in return for the lands it granted. In a neat reversal of the 'trickle down effect', the nobles would then receive payment from the peasantry who worked their land. Direct taxes in this country are next mentioned in the 9th century when the Shipgeld (which funded naval defence) and the better-known Danegeld were introduced. The latter was a levy of four shillings on each hide of land (around 120 acres). The resulting revenue was paid as protection to the Danish Vikings to prevent them from attacking the east coast. Long after the actual threat had receded the Crown continued to levy the tax under the pretext of possible attacks. It was abolished, however, by Edward the Confessor in the 11th century, only to be revived by the Normans after the conquest.

Taxation was clearly a subject that William the Conqueror took very seriously. Indeed, the Domesday survey was largely an attempt to gauge the taxable value of his newly-acquired realm. The main contribution of the Normans to posterity, however, came with the foundation of the Court of the Exchequer, named after the chequered tablecloth upon which accountants would present His Majesty's monies. Although collection of taxes was still notoriously difficult, the Exchequer went some way towards ordering the Crown's finances and satisfying the growing need for hard currency. Its principal use was to cover the cost of expensive foreign commitments, in particular the Crusades.

The early 14th century saw the first use of the system of 'tenths' and 'fifteenths' - a tax levied on landowners on the basis of one-tenth or one-fifteenth of their property's value. Rather than being collected annually, as was the case with most taxes, these were granted to the king by parliament on an ad hoc basis and were used to fund expenditure outside the Crown's normal remit - notably The Hundred Years' War.

Later that century three poll taxes were introduced in the space of four years, mainly to fund Richard II's military aspirations. A reluctance to pay on the part of the populace rendered them relatively ineffectual. The extent of tax evasion is sharply illustrated by an apparent drop in the population of half a million between the poll tax of 1377 and its successor three years later.

Such failures encouraged attempts to impose other taxes based on all manner of measures of individual wealth; female servants, watches and dogs were all used as indicators of ability to pay. The most celebrated of these was the surprisingly successful 1696 window tax, based on the number of windows in a house. Seventeenth-century tax avoidance is still visible today in the form of bricked-up windows.

The scrupulous book-keeping of both Henry VII and Elizabeth I made for few direct taxes in Tudor times. Tax receipts during Elizabeth's reign averaged less than £80,000 per annum - a minuscule sum, even allowing for inflation. Under Henry VIII, a notorious bon viveur, taxes were similarly low: his lifestyle was largely financed by his father's fortune and the spoils of the monasteries. Direct taxes reappeared with the Stuarts and were imposed under the catch-all phrase 'for the defence of the realm'. They included a ship tax, which, in effect, was little more than a 17th-century version of the Shipgeld.

Oliver Cromwell's alterations to the tax system were fraught with difficulties. His attempt to tax each district through a board of local commissioners was crippled by an ineffectual bloated bureaucracy and the commissioners' own nepotism. The unpopularity of taxes throughout the 17th century, together with the problems involved in their collection, further hastened the monarch's waning influence over the nation's purse. By the close of the century control of the economy had passed to a new generation of financially-astute politicians such as Pitt, Montague and Walpole.

It was not until the end of the 18th century, with the introduction of William Pitt's income tax act of 1799, that the first recognisably modern system of personal taxation came into being. It was notable, above all, for being a progressive tax, with a top band of 10%; yearly income up to £60 was tax free; that between £60 and £200 taxed at a graduated rate starting at two old pence in the pound; and that above £200 taxed at two shillings in the pound. It was at around this time that Britain was reasserting itself on the European stage and the monies raised by the tax made a significant contribution to the ruinously expensive Napoleonic wars - hence the title, 'the tax that beat Napoleon'. When peace came in 1816 parliament narrowly voted for its abolition under intense public pressure.

In the wake of the 1841 Conservative victory, income tax resurfaced at a basic rate of seven old pence in the pound (or 2.9%). By the 1850s concern over large annual payments led to the introduction of phased deductions - a precursor of today's PAYE scheme - for all civil servants and employees of the royal household.

Income tax rose again in response to the Crimean War and then fell until the mid-1870s when, at its lowest point, the standard rate was less than 1%. As its overall contribution to government coffers was so insignificant - it accounted for just 3% of total tax receipts - many predicted its imminent demise. The rate picked up, however, and remained stable until 1915 when the cost of World War I sent it soaring to 30%. Levels then declined, but the aftermath of war and the ensuing depression ensured that it remained higher than at the beginning of the century. The advent of World War II forced a further escalation of the standard rate to an all-time high of 50%. In the post-war years it fell in fits and starts until the 1970s, when income tax not only rose sharply, but took on a byzantine complexity.

Here, the new regime of the so-called 'tax and spend' Labour government infamously fell on the very rich. The highest band, which stood at 83% for much of the decade, was enough to drive many into temporary, sometimes lasting, offshore exile. A surcharge of 15% for unearned income took the top rate to a punitive 98% when high-earners supposedly needed to make £10,000 to buy a suit. These rates persisted until 1979 when pledges of massive tax reduction helped the Conservatives to power. Within a year swingeing cuts and simplifications had pulled the top rate down to 60%. Rates remained fairly static into the late 1980s, when further stream-lining left two bands (effectively at 25% and 40%) as opposed to the previous 11. Aside from occasional upward adjustments in the personal allowance, the rates have remained static since 1988.

Although lower than at any time in the last half century direct taxes are still historically high. The chance of any return to 19th-century levels appears slim; today's public sector, though recently reduced, is still vastly more complex and expensive than that of our Victorian forefathers. Short of the chance discovery of vast natural wealth, which allows some governments, like Alaska's, to pay its citizens a 'negative tax', the current personal tax burden is likely to remain largely unchanged. Over the last two centuries, our lives may have become wealthier and longer, but Benjamin Franklin's 1789 dictum - on the inevitability of both death and taxes - remains as true today as it ever was.

THE TAXPAYERS' BURDEN

Rate % Comments

2nd century 10 Roman tax on the ancient Britons

9th century - Danegeld set at 1-4 shillings per 120 acres

of land

14th century 6.7-10 System of tenths and fifteenths on land value

1696 - Imposition of window tax

1799 10 William Pitt introduces the first modern

income tax

1816 0 Income tax abolished

1843 2.9 Income tax reintroduced after Tory victory

1875 0.8 Income tax falls to two old pence in the pound

1917 25 Tax rises to pay for World War I

1942 50 World War II forces rates to an all-time high

1976 35 Higher tax bands proliferate under Labour

1980 30 Conservatives cut rates and simplify tax

structure

1986 29 Basic rate cut

1987 27 Further cut in basic rate

1988 25 Basic rate cut to 25% and highest rate cut to

40%.

All other rates abolished.

Find this article useful?

Get more great articles like this in your inbox every lunchtime