§ Mr. FormanTo ask the Chancellor of the Exchequer what would be the estimated full-year costs at 1996–97 income levels of introducing an income tax structure of two positive rates at 20 per cent. and at 40 per cent., assuming transferable personal allowances of £5,000 per person, existing tax threshold for each of the two positive rates, and the abolition of all other tax expenditures, exemptions and reliefs now allowable against income tax. [27233]
§ Mr. JackThe estimated full-year cost of introducing two rates of 20 per cent. for taxable income up to £25,500 and 40 per cent. for taxable income over £25,500 at 1996–97 income levels would be about £3 billion, assuming a personal allowance of £5,000 transferable between spouses and the abolition of all other income tax allowances, and mortgage interest relief, tax relief on employee's contributions to occupational and personal pension 617W schemes, reliefs for tax-exempt special savings accounts, personal equity plans, TESSAs, PEPs and profit-related pay, national savings certificates, employee share schemes and charitable giving.
This estimate does not take into account the substantial behavioural effects which might result from the introduction of such a change; nor does it allow for any subsequent changes to the tax system, such as changes to tax relief on employer's contributions to pension schemes or relief for investment income in pension funds.