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Income Tax

Volume 932: debated on Monday 16 May 1977

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asked the Chancellor of the Exchequer what would be the effect on the retail price index if the basic rate of income tax were reduced (a) to 30 per cent. and (b) to 25 per cent., using the same calculations as he gave in his Budget Statement, Official Report, 29 March, column 284.

On the assumption that such reductions replaced increases in wages yielding the same net benefit, a reduction in the basic rate of income tax to 30 per cent. together with the other tax reliefs announced in the Budget would be worth 4¾ per cent. off the RPI by the end of 1978, and a reduction in the basic rate to 25 per cent. would be worth 8¼per cent. off the RPI. This is before any increases in indirect taxation which might be needed to offset such large direct tax reductions.