STEALTH TAXES

Secret plans for a multi-billion-pound package of stealth taxes on fuel, cars, air travel and consumer goods have been drawn up by the government to combat global warming. The proposals show that the Government is considering introducing a range of hard-hitting 'eco-taxes' that will have a devastating effect on the cost of living.

Most controversial of all, the documents reveal the Government is planning to grab billions of pounds of extra revenue from motorists, without telling them. It is considering introducing a special mechanism so that whenever oil prices go down, the Government would get the cash in extra fuel tax, not the motorist.

A letter from Environment Secretary David Miliband to Chancellor Gordon Brown says the advantage of this is that the Government would gain billions of pounds 'without individual announcements on fuel-duty rises needing to be made'. Mr Miliband calls for tough measures to combat 'car use and ownership' with a 'substantial increase' in road tax.

He also suggests a 'Treasury mechanism' allowing the Government to benefit from any fall in oil prices and reintroducing the 'fuel-duty escalator', which put up the duty on petrol by 5% over inflation until Mr Brown ordered a freeze in 1999.

Mr Miliband calls for a new 'pay-per-mile pollution tax' on motorists, VAT on air travel to EU destinations and new taxes on inefficient washing machines and light bulbs. He also backs laws to let local councils impose a 'rubbish tax' on households by using 'spies' placed in dustbins to weigh non-recyclable refuse. (Source: Mail on Sunday, Oct/06)

Income taxes are at their lowest level in history, yet we pay more tax than ever before. Why? 'Stealth' taxes, that’s why. There are good recent examples in which the tax take has been increased without the taxpayer being aware of it. The most apparent is the phasing out of mortgage interest relief (MIRAS), the removal of married couples’ allowance and the removal of the ability of non-taxpayers to reclaim the tax credit on share dividends. Indeed, two good examples of stealth taxation - personal allowances and the higher-rate tax threshold - were both mentioned in the Pre-Budget Report for the wrong reasons. Both are only due to increase in April 2002 by the rate of inflation (1.7%). Yet earnings are rising at the much faster rate of 4.5%. This means that more than 2.7 million of the 28 million taxpayers are in the higher rate bracket in which earnings above £33,935 are taxed at 40% - 1 million more than 10 years ago.

Here are just some of the stealth taxes that have been implemented - or that we know will be implemented - in the future.

* The gradual reduction of the value - and now the complete removal - of the married couple’s allowance for couples aged under age 65.

* The gradual reduction - and now complete removal of mortgage interest tax relief at source (MIRAS).

* The removal of the age-related married couple’s allowance, where neither of the married couple were aged at least 65 on 5 April 2000.

* The removal of the ability of pension funds to recover the tax credit on UK dividend income – which works like compound interest in reverse - meaning that pension contributions will need to be increased to provide the same level of benefits.

* The inability for non-taxpayers to recover the 10% tax credit on UK share dividends.

* The reduction in the level of tax-free savings that can be made each year. Under PEPs/TESSA it was £12,000, (£9,000 for PEPs and £3,000 for the first year of a TESSA). Under the ISA it is £7,000.

* The failure of the higher-rate tax threshold to increase at the same rate as earnings. Since 1988, this threshold has increased by just 52% to £29,400 while average earnings have increased by 84%. Since 1997, approximately 200,000 more people have to pay tax at the top rate.

* The failure of the nil-rate inheritance tax band to increase by the rate of inflation. This means more inheritance tax will become payable - especially on the death of property owners.

* The inability for PEPs and ISAs to recover the tax credit on UK dividends after 5 April 2004.

The impact of stealth taxation is borne out by the statistics, which show that, although rates of tax have reduced, the government expects to increase its overall tax take in 2001. It has been reported that the Tories collected £99.1 billion in income tax in their last year in power, and that this year Gordon Brown expects to collect £145 billion. This represents a whacking 45% increase in the income tax take, which is due to the impact of more people now being subject to higher-rate tax and more cash being raised by stealth taxation.

Homeowners are facing property tax rises of £700 or more this year thanks to a punishing series of stealth tax hikes on their homes. The average taxpayer in England could be forced to pay out up to £4,500 in taxes on their home in 2007 thanks to soaring council tax and stamp duty charges combined with new local levies on rubbish removal and plans for a shake-up of town hall finances.

The spiralling cost of the bill for the 2012 Olympic Games could also mean that taxpayers are asked to foot the bill. The Government's own figures show that costs have risen by £900million and while the Mayor Ken Livingstone but critics warn that the £20 a year council tax levy to pay for the Olympics could either be raised or extended beyond the current 10 to 12 year period.

In addition, the Budget this Spring is expected to lead to stealth tax rises in stamp duty because tax thresholds will rising in line with house price inflation. In some parts of the country, the average home now pays 3% stamp duty, £7,500 on a £250,000 property. That threshold has never been changed since it was introduced by Gordon Brown.

Matthew Elliott, chief executive of the Taxpayers' Alliance, said, "Homeowners are already feeling taxed to the hilt, but as the year progresses things will only get worse. As well as a barrage of sneaky property taxes, taxpayers will fork out more for their mortgages because of higher interest rates and more for their utility bills." (Source: Daily Mail, Jan/07)

Billions of pounds are being raised in green taxes with little or no reward for environmentally-friendly consumers, according to two new studies. Each British family is paying £400 more in green taxes than it would cost to cover its carbon footprint, according to the TaxPayers' Alliance. It says green taxes raised £21.9billion in 2005, £10billion more than the social cost of that year's carbon emissions of £11.7billion.

And a poll by YouGov for the group showed that nearly two-thirds of people think politicians are using the green issue as an excuse to pull in more cash. A separate study revealed that the Government gives back in tax breaks just two per cent of the money it collects through environmental taxes. The Treasury receives around £29.3billion each year in green taxes such as air passenger duty, accountants UHY Hacker Young said.

The Government raises £25.1billion in fuel duties and takes in £2.1billion in air passenger duty each year but it gives just £254million back in lower vehicle excise duty for people who drive environmentally-friendly cars. And the total it hands back each year to environmentally-friendly taxpayers is £549million. Matthew Elliott of the TaxPayers' Alliance said, "We need more honesty about the costs of extra green taxes when British taxpayers already pay some of the highest pollution charges in the world."

A Treasury spokeswoman disputed the studies. She said, "The Government's definition of environmental taxes includes those taxes that are designed to primarily have an environmental impact, the climate change levy, aggregates levy and landfill tax. We make clear, for example, when setting fuel duty rates that the Government takes into account a range of factors, including costs of motoring such as congestion, and the need to maintain sound public finances." (Source: Daily Mail, Sep/07)

Nearly two in three people think ministers use environmental fears as an excuse to rake in more taxes. Research shows green taxes, like those slapped on fuel and air travel, bring in £10billion MORE than the cost of offsetting the UK population’s carbon footprint. Gordon Brown and David Cameron want individuals to pay for damage to the environment but research shows the Government gives back just £2 in £100 raised to greener taxpayers. Only one in five think ministers are trying to change our ways, found the TaxPayers’ Alliance poll. (Source: The Sun, Sep/07)