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Last Updated: Monday, 4 August, 2003, 11:29 GMT 12:29 UK
Poorest pensioners hit by 'stealth' taxes
Calculator and coins
Indirect taxes costly for poorest pensioners

The incomes of the UK's poorest pensioners are being hit hard by "stealth taxes", figures obtained by the Liberal Democrats indicate.

According to the figures, from the Office for National Statistics, the poorest pensioners are proportionally paying twice as much in indirect taxes, such as council tax and VAT, as the richest pensioners.

In practice, this means the poorest pensioners are spending 26% of their total income in indirect taxes, while the top fifth of pensioners, by income, pay only 13% of their gross income in indirect tax.

There is increasing discontent over recent council tax rises among some pensioner groups, with some retired people refusing to pay up.

What are indirect taxes?
Main indirect taxes: VAT, duty on alcohol, duty on tobacco, duty on hydrocarbon oils, vehicle excise dut
Others include: Betting taxes, gaming taxes, customs duties, air passenger duties, insurance premium tax, inheritance tax, severance pay tax, receipts from Building Society demutualization
Office for National Statistics

Matthew Taylor, Liberal Democrat treasury spokesman, said: "We know the unfair Council Tax slams the poor hardest and yet successive Tory and Labour governments keep forcing it up.

"It is time to scrap the Council Tax, which Gordon Brown plans to hike by 10% over the next two years."

Pensioners are to protest in London in September over the issue.

We are doing a whole host of things to tackle pensioner poverty
DWP spokesman

Richard Wilson, incomes policy officer at Help the Aged said council tax was a growing issue for older people - and the charity was campaigning to have the tax reformed.

"Help the Aged has been deluged with letters and calls from pensioners concerned about stealth taxes, and in particular about increases in Council Tax.

"Because pensioner incomes are lower than those of people of working age and are fixed, they are much more exposed to the impact of Council Tax increases.

Whilst Council Tax has doubled over the last 10 years, a pensioner who retired 10 years ago has only seen their income increase by one third.

About 1.4 million pensioners who are entitled to Council Tax Benefit are entitled but do not claim, according to Help the Aged.

Latest news, background and analysis from BBC News Online's pensions in-depth section

The Department for Work and Pensions said it was working hard to tackle the issue of pensioner poverty.

"Pensioner poverty has fallen by 60% in absolute terms or by 15% in relative terms betwen 1997-8 and 2001-2002," said a spokesman.

"We are doing a whole host of things to tackle pensioner poverty, including the introduction of Minimum Income Guarantee, Pension Credit, an additional winter fuel allowance for the over 80s and free TV licences."

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