Taxation Yield (Hansard, 19 April 1973)

§ 1. Mr. Redmond
asked the Chancellor of the Exchequer by what proportion direct taxation would have to be increased to produce the same yield as value added tax; and what would be the rates of corporation and personal income tax which would result.

§ The Minister of State, Treasury (Mr.John Nott)
The yield of value added tax for 1973–74 is about 20 per cent, of the yield of all Inland Revenue duties, so that those duties would have all to be increased by approximately one-fifth. This would result in rates of income tax for 1973–74 ranging from 36 per cent. to 90 per cent., with an investment income surcharge of 18 per cent. The rate of corporation tax would be 47 per cent. compared with the present 40 per cent.

§ Mr. Redmond
Is not the real answer to this that if the policies advocated by the Opposition were to be implemented the threshold of direct taxation would have to come down, affecting the lower paid and undoing the work done by the Government in that respect?

§ Mr. Nott
I entirely agree with my hon. Friend. The tax threshold, which we have raised considerably while we have been in office, would of course fall should the Labour Party ever come to power again and there would be greatly increased taxation on the ordinary people of this country.

§ Mr. Jay
Will the Minister say what the rate of VAT would have to be if income tax and corporation tax were abolished?

§ Mr. Nott
I cannot answer that question without notice.

§ Mr. Brian Walden
Will the Minister agree that it is utter twaddle to try to compare indirect and direct taxation in this way? Will he make an estimate of what the various rates of taxes would be if value added tax had never been introduced and if we had stuck to purchase tax and selective employment tax, if we had not joined the Common Market and if we never had to pay for the common agricultural policy and various matters of that nature?

§ Mr. Nott
If we had set out to raise the same amount of revenue from indirect taxation as when the Labour Party was in office, value added tax would have had to come in at a rate of 15 per cent. instead of 10 per cent. In 1969 indirect taxation represented 156 per cent. of the gross national product. By 1972 we had reduced indirect taxation and the figure had come down to 12.9 per cent.

§ 11. Mr. Knox
asked the Chancellor of the Exchequer what were the percentages of the revenue taken in direct taxation and indirect taxation in the year 1972– 73;and how the figures compare with those in the year 1969–70.

§ Mr. Nott
Figures for the financial year 1972–73 are not yet available. For the calendar year 1972 the share of central Government's total current receipts taken by direct and indirect taxation were 40. per cent. and 34.4 per cent. respectively. This compares with 39.9 per cent. and 38-8 per cent. for 1969.

§ Mr. Knox
Does my hon. Friend agree that the figures show clearly that the tax changes which have taken place under the present Government have favoured less-well-off people rather than those who are well off?

§ Mr. Nott
I entirely agree with my hon. Friend. The biggest single tax cut made by the Government was in direct taxation. The increase in personal allowances made in last year's Budget gave the equivalent of £1 a week to every family. That, of course, was of particular benefit to the lower paid. The decreases in indirect taxation have also been of great importance.