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Independent taxation a failure, says report

13 September 2013

THE introduction of independent taxation a quarter of a century ago by the then Chancellor, Nigel Lawson, has failed in its stated aim of introducing fairness for families into the tax system, a new report by the charity Care suggests.

In a detailed study, Independent Taxation - 25 years on, Care argues that "one-earner families face more fiscal discrimination in 2013 than they did in 1990. . . The tax threshold has scarcely risen for families."

The report acknowledges that the individual tax burden has reduced significantly over the past 25 years. It argues, however, that the absence of transferable allowances, which were part of the original package of reforms first proposed by Lord Lawson in his 1985 Budget speech, "has resulted in families' bearing a greater share of the income burden than before the changes".

"The reformers wanted to make the tax system fairer for married women . . . and to reduce the discrimination against one-earner married couple families," the report said, but "even though the basic rate is lower, the income tax burden on some families is much the same as it was then."

Care is calling for the introduction of transferable tax allowances for married couples, and it has won the support of Lord Lawson. In a foreword to the report, he says that the "watering down" of his proposals for transferable allowances "had occurred largely because of the then Prime Minister's pronounced lack of sympathy for mothers who stayed at home to look after their young children rather than going out to work".

He said that "the case for transferable allowances remains as strong as ever. . . It is not only family friendly but provides a far more cost-effective means of reducing the tax burden on low-income households than can be achieved by an across-the-board increase in personal allowances."

 

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