What about the tax reliefs that benefit high-earners?

Published: 12 November, 2010

• RICHARD Murphy showed how the tax reliefs that never appear in government spending statements provide “welfare” for the well-off (We suffer cuts, but tax cheats prosper, November 5). For example, Cameron’s idea of replacing child benefit with extra tax relief for husbands would take what is currently classified as “spending” out of Budget statistics on spending and revenue, even though the Treasury could lose the same amount of money.

But he missed out one crucial piece of information. The Treasury is currently reviewing tax reliefs and will produce an interim report later this autumn. Tax reliefs reduce the Treasury’s income by about £170-£200billion each year. Many of them are not even mentioned in the tables, including one of the biggest – exemption of higher values of homes from council tax. 

If councils could charge council tax of even 0.1 per cent on values of homes over £500,000 (currently tax-free), it would go a long way towards helping pay for local services and stop council tax being so unfair on people with modest incomes and savings. Another unfair example is pension tax relief, which mostly goes to high-earners and costs the Treasury about £45billion each year. 

Conversely, a lot of tax reliefs need to be kept – for example, the zero-rating of food for VAT – and the Treasury needs to be told how much we value those reliefs.

If anyone cares about these items of what are termed “tax expenditure” but never quantified as “expenditure” in Budgets or spending reviews, they should write quickly to John Whiting, Tax Director, Office for Tax Simplification, c/o The Treasury, 1 Horseguards Road, London SW1A 2HQ. 

HMRC publishes estimates of how much most of the tax reliefs cost: tables 1.5, B1 and 7.9. (Note that table 1.5 makes the benefits of pension tax relief look much lower than they really are, especially since contributions to the state pensions that the poor rely on do not attract any tax relief at all, even though state pensions are taxed in receipt.)   

It’s shocking that the media, especially the BBC, didn’t raise the issue of tax reliefs in their coverage of the spending review. Maybe journalists benefit too much from them?   

MARY CAMPBELL
N7 

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