A Taxing Question

tax-financial-educationThe row over Google’s tax affairs has brought the whole question of who pays tax and how much tax they should pay, right into the centre of public debate. Googlegate has shown how companies can exploit all sorts of loopholes and exemptions in our tax laws to their advantage, as they can employ accountants and lawyers who devote their professional lives to mastering how to keep one step ahead of HMRC.

For the rest of us these facilities are not available, and the next generation of young adults will have to pay tax to the government every month of their working lives, probably taken at source by their employer before they even see the money, via the PAYE system.

When we explain how income tax actually works in practice to students playing Keep the Cash! in schools and colleges, they are astonished. They ask us who decides how much of their money to take off them?

  • They ask us what it is all spent on?
  • They wonder whether they can keep a bit more of their money, and pay less tax, if they are a bit strapped for cash?
  • Is it possible, they ask, to call the tax office and ask for a breather while they pay off other debts?

When we explain that tax is an inescapable burden for every one of them, and is spent on all the things they depend on – the NHS, police, their school etc – they ask us why none of this has ever been explained to them?

Paying tax to support the public services we all depend upon, is one of the very few things we can confidently forecast for the future of every young person who gets a job. It is astonishing when you think about it, that we don’t teach young people about tax and the massive impact it will have on their lives.

When the penny drops

When playing Keep the Cash!,there is a moment when it suddenly dawns on students that the salary for a job, any job, offered to them in the course of the game, is not what they will actually receive in their bank account, because a big slice of that salary will be taken off them by the government.

We explain to them that this is the price they pay for being citizens, and that as the tax payers of the future, it is foolish for them not to be active citizens who play their full role in the society which they help to fund. And so in one short period we have shown them the connection between being financially literate and being an active and well informed citizen: something that politicians, social scientists and other opinion formers spend their lives pontificating about, but achieving precious little.

The Four Pillars

There are four pillars which support an independent and solvent adult life: employment, finance, property and the state, because these are the four matters which impinge on the lives of every one of us. We need to get a job to fund our lives; we need to understand how to use that money to sustain ourselves; we have to have a roof over our heads (however we pay for it) and so we need to get to grips with how we use property and we pay tax to fund the state and so we need to be active citizens to police how our money is spent.

We want to see our children become sufficiently financially literate to manage their affairs. Teaching them about a life time as tax payers is an essential part of that and until we do so, we cannot hope to see them as fully rounded citizens.