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Income Tax

Volume 929: debated on Friday 1 April 1977

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asked the Chancellor of the Exchequer what estimate he has made of the percentage rate of income tax which levied at the same percentage on every taxpayer, would yield the same total as the present system of variable income tax rates yields.

Assuming that the uniform rate of tax was applied to the total income of persons as defined on page 159 of Inland Revenue Statistics 1976, the rate required to produce the 1976–77 yield of income tax would be about 22½ per cent.

asked the Chancellor of the Exchequer to what would the standard rate of income tax need to be increased assuming that the upper rates remained unchanged, if the national insurance contribution paid by employees and the self-employed were abolished and if the total income of the Government were not to fall as a consequence (a) in the current financial year and (b) in each of the past five financial years.

The basic rate of income tax would need to be increased to 43 per cent. for 1976–77 and rates for earlier years would be as follows:

per cent

asked the Chancellor of the Exchequer (1) what investigations he has made of the introduction of a self-assessment income tax system similar to that operating in the United States of America;(2) what is his estimate of the amount of manpower which could be saved in the Inland Revenue by the introduction of a self-assessment income tax system in the United Kingdom.

The possibility of a change to a self-assessment income tax system in the United Kingdom has been studied on a number of occasions. The essential feature of such a change would be that the taxpayer or his agent would become responsible for the calculation of his own tax liability, a task which is currently undertaken by the Inland Revenue. The extent of the saving would depend on such considerations as the type of system adopted, the degree of checking undertaken, and so on. But there would only be net saving to the economy so far as the reduction in Revenue staff were not offset by increases in private compliance costs.

asked the Chancellor of the Exchequer what would be the estimated effect on personal tax yield if all individuals moved over to self-assessment; and what would be the saving in the Treasury' costs.

pursuant to his reply [Official Report 28th March 1977; Vol. 929, c. 38], gave the following information:Self-assessment of personal income tax would not affect the yield of tax in principle; in practice, however, it is unlikely that self-assessment would be feasible without changes in the tax system. The effect on the yield and on Inland Revenue costs would depend on the nature and extent of these changes.