Much has been written in 2024 about the price of a beer in hostelries across Northern Ireland.
And as various studies have shown, a pint in Belfast, Bangor, Banbridge or Ballinamallard can range from just over £3 to more than £8, depending on where you prefer to go for your favourite tipple.
Much of that price, of course, is made up in a range of overheads, notably tax.
So how much tax should you be paying on your pint?
I’ve plagiarised this piece which has been doing the rounds for many years (the original author, I believe, was Esme Shakeshaft from Moore UK chartered accountants) and it is well worth repeating for the non-initiated.
So, suppose that every day, 10 friends (they don’t all need to be from the Irish News!) go out for a few beers and the bill for all 10 comes to £100.
If they paid their bill the way we pay our taxes, it would go something like this . . .
- The first four (the poorest) would pay nothing.
- The fifth would pay £1.
- The sixth would pay £3.
- The seventh would pay £7.
- The eighth would pay £12.
- The ninth would pay £18.
- The tenth member of the party (the richest) would pay £59.
So, that’s what they decided to do.
The 10 friends drank in the bar every few days and seemed quite happy with the arrangement, until one day the bar owner threw them a curve ball.
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer bill by £20″. Drinks for the 10 friends would now cost just £80.
The group still wanted to pay their bill the way we pay our taxes. So the first four were unaffected. They would still drink for free.
But what about the other six friends, the paying customers? How could they divide the £20 windfall so that everyone would get his or her fair share?
They realised that £20 divided by six is £3.33. But if they subtracted that from everybody’s share, then the fifth and the sixth friend would each end up being actually paid to drink their beer.
So, the bar owner suggested that it would be fair to reduce each person’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
- And so the fifth friend, like the first four, now paid nothing (100% saving).
- The sixth now paid £2 instead of £3 (33% saving).
- The seventh now paid £5 instead of £7 (28% saving).
- The eighth now paid £9 instead of £12 (25% saving).
- The ninth now paid £14 instead of £18 (22% saving).
- The tenth now paid £49 instead of £59 (16% saving).
Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the friends began to compare their savings.
“I only got a pound out of the £20 saving,” declared the sixth guy.
He pointed to the tenth man and said: “but he got a £10 saving!”
“Yeah, that’s right,” exclaimed the fifth friend. “I only saved a pound too. It’s unfair that he got 10 times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get £10 back, when I got only £2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four friends in unison. “We didn’t get anything at all. This new tax system exploits the poor!”
The nine friends surrounded the 10th guy and beat him up.
The next night the 10th man didn’t show up for drinks, so the nine sat down and had their beers without him.
But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, in a nutshell, is how the tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.
Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
The original author signed off his piece by saying: “For those who understand, no explanation is needed; for those who do not understand, no explanation is possible.”
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