Filed under: Tax
Institute of Directors boss Simon Walker has called on the Government to introduce a standard flat tax rate. Walker claims such a move would help many middle class families - particularly those with a partner earning more than £60,000, now denied child benefit.How realistic is Walker's call - and do his claims ring true for some British families adjusting to Osborne's tax changes?
Flat tax for flat-earthers?
First, child benefit. Currently child benefit for families - those who are eligible - is worth £20.30 per week for the first child and £13.40 a week for more kids. Cutting this benefit, some have claimed, means a single earner in a family of six earning is hit by a 'marginal tax rate' of 73%.That's highly debatable. Families of six are not typical. Child benefit was never a tax and should not be calculated as a tax. The new rules meanwhile still mean that a two-parent family with a total income of £99,000 remains eligible for child benefit.
(The benefits system attempts to target households but the tax system target individuals - so Osborne's child benefit move is unintentionally confusing.)
Higher NI
Accountant Richard Murphy doesn't like the idea of a UK flat tax. Earlier this year he said those on low incomes would pay more from a flat tax rate "because around the world flat tax systems are associated with high National Insurance contributions - that hit the lowest paid hardest.""So flat taxes are really about cutting taxes for the best off, cutting services (like the NHS) massively and requiring payment for their use instead, and increasing tax, overall, for the least well off. That's the reality."
IoD boss Simon Walker though isn't persuaded. "I would like to see," Simon Walker told the Sky News Murnaghan show, "that there is a level above which the tax take should never rise, so you should never pay more than 50p on the pound you bring in. If you are doing that you are doing something that is wrong and that degrades the motivation to work.
Simple?
He went on: "I am all for a flat simple tax system - it has been shown to raise a lot more money. The top one per cent of taxpayers pay 15 per cent of all the tax in this country. Flat, simple taxes are the way to do it."Meanwhile Saturday was the deadline for 200,000 better-off families to register with HM Revenue and Customs (HMRC). New rules from January 2013 sees child benefit cut completely if one parent earns more than £60,000.