Income Tax

HC Deb 26 February 1987 vol 111 cc411-3

12. Mr. Fallon

asked the Chancellor of the Exchequer what information he has on the starting rates of income tax in other European Community countries.

Mr. Brooke

The United Kingdom has the second highest starting rate of national income tax in the Community and the third highest rate, after Denmark and Ireland, when local income taxes are included. I shall arrange for further information to be placed in the Official Report.

Mr. Fallon

Are the starting rates of tax not too high? Will my hon. Friend reinforce his determination to cut tax for the low-paid by paying particular heed to the advice in last week's Militant newspaper that Labour leaders are at last realising the electoral damage being done by their pledge to reverse Tory tax cuts and that ordinary employed workers fear"—

Mr. Speaker

Order. The hon. Gentleman must summarise, not quote.

Mr. Fallon

that ordinary employed workers fear that Labour will increase their already heavy tax burden.

Mr. Speaker

Order. I repeat that the hon. Gentleman must summarise, not quote.

Mr. Brooke

Answering my hon. Friend's question sub specie aeternitatis, I think that my right hon. Friend has indicated that he proposes to cut tax. In the narrower context of St. Patrick's day, it would be wrong for me to quote. The quotation from Militant did not appear to be one which the Opposition enjoyed.

Mr. Winnick

Has the Minister seen the memorandum from the Tory Reform Group— a number of Cabinet Ministers are associated with that organisation—which has argued strongly that, instead of cutting taxes, the Government should make further substantial investment in housing, education and the rest? Is the Minister aware that what we complain about are not tax cuts for the lowest paid, who should certainly get relief, but the tax cuts that have benefited the wealthiest people under the Tory Government?

Mr. Brooke

I have read a wide number of representations, from Militant to the Tory Reform Group, but that does not allow me to anticipate my right hon. Friend's Budget.

Mr. Maples

The disparity in the starting rates of tax highlighted by my hon. Friend's answer is serious. Many of us hope that he will soon find himself able to do something about it. Does he not agree that tax revenues are not maximised by high rates of tax? Is that not borne out by the fact that over the last seven years the yield of higher rate tax in real terms has risen by 40 per cent. over a period when rates of tax have been reduced?

Mr. Brooke

My hon. Friend is quite right to draw attention to that element of buoyancy.

Following is the information:

Starting rate of income tax (per cent.) for a single person and for a married couple without children EEC Countries
	(a) National rates	(b) National and local rates combined
	Single person	Married couple	Single person	Married couple
Belgium	19	22	21	23
Denmark	21	21	49	49
France	26	19	26	19
Germany	22	22	22	22
Greece	5	7	5	7
Ireland	35	35/60	35	35/60
Italy	12	12	12	12
Luxembourg	11	11	11	11
Netherlands	15	16	15	16
Portugal	2.5	2.5	2.5	2.5
Spain	8	21	8	21
United Kingdom	29	29	29	29

1. 1. The rates relate to employment income.
2. 2. The starting rates are in all cases the lowest applicable when tax actually becomes payable. The figures reflect the latest enacted rate 413 scales, as far as is known.
3. 3. The rates shown may differ from the nominal rates of tax in the countries concerned because, where appropriate, they take account of employment income reliefs, minimum expense deductions, tax credits for personal allowances and other standard reliefs.
4. 4. In Belgium and Denmark local income taxes are payable in addition to the national rate. The combined figures for these two countries assume, in the case of Belgium, that the local tax is payable at the rate applicable to the majority of the population; in the case of Denmark at the Copenhagen rate, which is about average.
5. 5. The higher starting rate for a married couple in Ireland (60 per cent.) reflects the marginal relief just above the exemption limit. Where there is no longer any marginal relief, the rate reduces to 35 per cent.