Income Tax

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 6th November 1975.

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Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley 12:00 am, 6th November 1975

asked the Chancellor of the Exchequer how many persons are currently liable for income tax; and how many were liable four months ago.

Photo of Mr Robert Sheldon Mr Robert Sheldon The Financial Secretary to the Treasury

Since income tax liability is based on income for the year and not on the rate of income at a point in time, it is not possible to state the number of tax payers at a given date in the tax year.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

That answer is not entirely satisfactory. Although the effect of rapid wage and salary increases may be moderating slightly, is it not the case that large numbers of people are now passing the tax threshold and are liable to tax in very small amounts which may not cover the costs of collection, which are substantial indeed? In view of those substantial costs, will my hon. Friend examine the possibility of building into the system a greater degree of flexibility?

Photo of Mr Robert Sheldon Mr Robert Sheldon The Financial Secretary to the Treasury

I am always happy to do what I can to meet the wishes of my hon. Friends. I should point out that the estimates that are based on forecasts of personal incomes are for the year as a whole, because that is how the organisation works. I also remind my hon. Friend that the problems of the lower tax threshold have a lot to do with the levels of inflation. It is this with which the main plank of our policy is concerned.

Photo of Mr John Nott Mr John Nott , St Ives

Is it not also the case that the low tax threshold has something to do with the current level of Government expenditure? Is it not the case that the tax threshold will continue to be too low until the Government get a grip on this matter?

Photo of Mr Robert Sheldon Mr Robert Sheldon The Financial Secretary to the Treasury

There are two sides to the equation. Questions on public expenditure will be dealt with later. The hon. Gentleman will be aware that the two main reasons for not being able to increase the tax threshold are, first, the level of inflation, which remains an important concern of our programme, and, secondly, the low level of economic activity.

Photo of Mr Tom Litterick Mr Tom Litterick , Birmingham, Selly Oak

In view of the fact that informed opinion for the past decade or more has been that our taxation system is far from progressive, and that we are all committed, in principle, to the ideal of having a truly progressive taxation system, what are the Government's proposals to rejig the system so that it becomes truly progressive and, therefore, more equitable?

Photo of Mr Robert Sheldon Mr Robert Sheldon The Financial Secretary to the Treasury

I understand that my hon. Friend has some complaints about certain levels of tax at various stages along the path. He must be aware that a system is progressive when higher rates of tax are charged on higher levels of income. In so far as our system does that, it is truly a progressive one.