Tax ‘unlikely to be feasible’

Press, 14 September 1988, Page 10

Tax ‘unlikely to be feasible’

Treasury staff have been working on a scheme for a negative income tax as a way of targeting the transfer of income to people identified as "in need.” However, the Secretary to the Treasury, Dr Graham Scott, told Parliament yesterday that the simplest form of such a tax was unlikely to be feasible in practice. This form would be one in which equal-sized payments .were. made to everyone, and a_ single tax rate applied to r all income.' This was unlikely to be : feasible in practice because in order to provide even a modest level of

basic grant an extremely high tax rate would be needed — about 50 per cent plus, depending on the size of the grant. Dr Scott said this would represent a considerable increase in the level of marginal tax rates faced by most individual and corporate taxpayers. The present tax-benefit structure represented a modified form of negative income tax. Low-income households with children, who. qualified for . the ; guaranteed t ;. .minimum ; family J.,', income- - and Family Support, effectively paid negative income tax until income reached a certain point.