§ Mr. David ShawTo ask the Chancellor of the Exchequer (1) if he will provide a range of estimates on how a flat rate income tax could operate in the United Kingdom; [12609]
(2) what would be the estimated yield in a full year from a flat rate income tax if (a) the first (i) £7,000 and (ii) £10,000 of each taxpayers income was exempted from tax, (b) no tax allowances or deductions were allowed against income other then in (a) and (c) the income tax rates on the income above the levels in (a) were (1) 10 per cent., (2) 15 per cent. and (3) 20 per cent. [12608]
§ Mr. JackEstimated full-year costs at 1996–97 income levels are given in the table. These estimates include the abolition of mortgage interest relief and tax relief on employees' contributions to occupational and personal pension schemes. Adjustments have also been made to allow for the abolition of reliefs for TESSAs, PEPs, profit-related pay, national savings certificates, employee share schemes and charitable giving.
The estimates do not take into account the substantial behavioural effects which might result from the introduction of such changes nor do they allow for any subsequent changes to the tax system, such as changes to tax relief on employers' contributions to pension schemes or relief for investment income in pension funds. It is assumed that employers' and employees' national insurance contributions would remain as at present.
Estimates full-year costs at 1996–97 income levels (£ billion) Flat rate of income tax Income exempt from tax (£) 10 per cent. 15 per cent. 20 per cent. 7,000 45 32 18 10,000 51 40 29