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Local Taxation

Part of the debate – in the House of Commons at 4:53 pm on 4th July 2005.

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Photo of John Butterfill John Butterfill Conservative, Bournemouth West 4:53 pm, 4th July 2005

Well, at least we have one little extra gem to add to our understanding of Liberal Democrat proposals.

Local income tax would have a narrow tax base. Some boroughs would have few income tax payers. Either they would become increasingly dependent on central Government funding or the few income tax payers left in some poor boroughs would pay massive amounts of local income tax. They would bear a swingeing burden. It has already been said that hard- working husbands and wives, with heavy responsibilities, would be worse off. I do not know whether the Liberal Democrats propose to do something to help them.

The real problem with local income tax is that the administration is so difficult. First, unlike in some other countries, people in this country do not pay income tax where they live but where their employers are based. Local authorities that wanted to collect local income tax would have to find out where residents' employers were based. They would have to apply through the employers to the tax office to find out those residents' incomes. It is no good the Liberal Democrats claiming that it can be done through the tax code; it cannot. The tax code gives information only about a person's allowances, not a person's income. Unless the local authority knew the income of each tax-paying individual in the local district, it could not calculate the product of a local income tax. It would be flying in the dark. Officials at the town hall would need to know the income of every resident in the area.