I do not wish to try your patience, Mr. Atkinson, but the same principle and degree of complexity are involved in that context too. For our purposes this morning, one table will suffice to illustrate the complications in, and the potential effect of, the 11 different marginal tax rates.
The issue gives rise to the absurd position that a taxpayer earning £105,000 has a marginal rate of 61.5 per cent. on additional income, while a taxpayer earning £155,000, which is 50 per cent. more, has a marginal rate of only 51.5 per cent. Furthermore, a taxpayer earning £125,000, which is somewhere in between those two figures, has a marginal rate of just 41.5 per cent. It makes absolutely no sense, and I would like a proper explanation from the Government of their work on the rates. We will now have 16 different personal tax rates, including those levied on trusts and dividend income, and the only people who will benefit from all of the complexity will be tax consultants. What are the Ministers thoughts on that?
In terms of practicalities, the issue also raises significant problems for the PAYE system with associated costs for both Her Majestys Revenue and Customs and for taxpayers who are in PAYE. The actual amount of the allowance depends on the level of income in the tax year, which will not be known until after the end of that year. The PAYE system cannot deal effectively with such situations, and will have to be based on estimates. In circumstances where an individuals usual income is well below £100,000, but they receive a one-off bonus taking it up to, for example, £120,000, the taxpayer will face a pretty much unprecedented underpayment of in excess of £2,590 at the end of the tax year, simply because PAYE will not be able to deal with the level of complexity associated with the 11 different marginal tax rates. In turn, that taxpayer expected PAYE to be collected at the right amount throughout the year and not at the end of it. Such a situation will throw certain fundamentals of the PAYE system into question and cause difficulties for individuals, HMRC and tax planners. The proposals do not sit comfortably with the PAYE system, which is not designed for that sort of complexity.