§ Mr. Dobsonasked the Chancellor of the Exchequer what is the best estimate of the loss of revenue under a scheme of mandatory independent taxation due to the reduction in the tax due from investment income of married couples if (a) no transfers of capital between spouses were made and (b) optimum transfers were made by all married couples to minimise tax liabilty; and what: (i) increase in investment income surcharge or (ii) lowering of the investment income surcharge threshold would be necessary in order to recover a sum equal to that under (a) and under (b), respectively.
§ Mr. Peter Rees[pursuant to his reply, 16 July 1981, c. 434.] The hon. Member does not specify which scheme of mandatory independent taxation he has in mind. The loss of revenue arising from the taxation of a wife's investment income as her income was calculated in very 388W broad terms at 1980–81 income levels for each of the four schemes described in appendix 6 of Cmnd. 8093 "The Taxation of Husband and Wife". In these calculations it was assumed that no transfers of capital were made, and that husband and wife would have a serprate threshold for the investment income surcharge at the same level as that for a single person. These results are given in table 18 of Background Paper No. 2 to Cmnd. 8093 and are in column 1 in the following table.
Very broad estimates of the increase in the investment income surcharge required to provide an equivalent yield are shown in column 2. These are calculated on top of the assumption that each new scheme of taxation had been adopted and that the increase would apply to everyone, not married couples alone. I regret that a reliable estimate of the equivalent reduction in the threshold, and the information requested in part (b), cannot be provided without undue expenditure of time and resources.
(1) (2) Loss of revenue due to taxation of a wife's investment income as her income Increase in investment income surcharge producing equivalent yield £ million 1980–81 income levels per cent. Scheme 1 (non-transferable allowances) 500 *30 Scheme 2 (fully transferable allowances) 250 15 Scheme 3 (Partially transferable allowances) 400 25 Scheme 4 (Child benefit option) 500 *30 * This would produce marginal tax rates of over 100 per cent, for some higher rate payers—for example, 60 per cent.+45 per cent, surcharge—and so should be considered as purely illustrative.