Britain's Low Earners BecomeTax Exempt Under CPS Proposals

by Robert Lee, Tax-News.com, London

13 July 2001

According to proposals penned by advertising giant Maurice Saatchi and economist Peter Warburton for the right wing think tank, the Centre for Policy Studies, people earning below £10,000 are too poor to be taxed. In their publication, Poor People! Stop Paying Tax!, the authors claim that the poorest people in the UK are paying tax at a rate of 63 per cent - ' It's a mad world with the poor paying higher taxes than the rich,' they wrote.

According to the report, the problem lies within the 'staggering complexity' of the current taxation system, it is an injustice that allows the government to claims billions of pounds a year in revenue from taxpayers who also claim billions of pounds a year in benefits from the government.

The authors have proposed a radical simplification in which they argue that the tangled web of benefits and credits is simply exchanged for lower tax. In their proposal, the personal income tax allowance is dramatically raised from £4,385 to £10,000. The advantage of this proposal is that eight million people earning less than £10,000 a year stop paying income tax altogether. The typical improvement in their net income is between 4 per cent and 10 per cent.

Messrs Saatchi and Warburton have suggested a simple yardstick of taxation to focus attention on the true levels of tax paid. They have declared 'Independence Day', which is the day of the year on which people stop working for the government and start working for themselves and their families, should be brought forward by 5 days. (In the last four years alone that day has moved from 27 May to 10 June).

Under the authors' proposal the UK's official tax burden falls from 38 per cent to 36.5 per cent. They argue that the result will be a dramatically more transparent and open system, understood by all. Not least by the eight million people who will stop paying tax.

Recommended