asked the Minister for Finance if he will give the following estimates, in relation to the tax year 1980-1981: (1) the cost of income splitting to the Exchequer, (2) the average net benefit for single-income married couples in the following income categories and the number of couples involved in each category as a result of income splitting: (a) total income of up to £6,000 per annum, (b) income of between £6,000 and £10,000 per annum, (c) income of between £10,000 and £15,000 per annum and (d) income over £15,000 per annum; (3) the total saving to the Exchequer in the event of the abolition of the tax free dependent spouse allowance and income-splitting, (4) the cost to the Exchequer of paying £25 per week to each dependent spouse with no income in his/her own right, who stays at home to care for children under 16, and who is not in receipt of any other State benefits, such as unemployment assistance, unemployment benefit, supplementary social welfare benefit, sickness benefit, etc., and (5) the number of single-income married couples who will not benefit from income splitting.
Written Answers . - Income Splitting .
: Following is the information requested:
(1) The cost of income-splitting, that is, effectively the doubling of the income tax rate bands for all married couples, is estimated at £72 million in a full year.
(2) The following table shows, for the income ranges specified in the question, the estimated average tax saving accruing to single-income married couples due to income-splitting and the numbers of couples involved. It must be emphasised that some of the figures contained in the table are highly tentative as a distribution of taxpayers by ranges of total income for 1980-81 from which more reliable estimates could be derived will not be available until mid-1982.
|
(1) |
(2) |
(3) |
(4) |
|
Range of total income |
Estimated average income in the range |
Estimated average tax saving resulting from income splitting |
Estimated number of single-income couples in each range |
|
£ |
£ |
£ |
000's |
|
Up to 6,000 |
4,000 |
77 |
90 |
|
6,000- 10,000 |
8,000 |
177 |
88 |
|
10,000- 15,000 |
12,500 |
990.5 |
28 |
|
over 15,000 |
20,000 |
1,738.5 |
10 |
The total income of a married couple is exempt from income tax if it does not exceed £3,400. Accordingly, such couples cannot benefit from income-splitting. An estimated average income of £4,000 is therefore inserted in column (2) for the lowest income range.
The figures in column (3) effectively represent the estimated saving to the taxpayer resulting from the doubling of the rate bands. The married allowance of £2,230 which was taken into account in computing the figures in column (3) does not result in any additional saving to the taxpayer because this allowance remained unchanged for 1980-81 as compared with 1979-80 and is double the single allowance for each of those years.
(3) It is assumed that the Deputy is referring to single-income married couples and has in mind a reduction in the married allowance (£2,230) to the level of the single allowance (£1,115) combined with the application to these couples of the tax bands for 1980-81 appropriate to single persons. It is estimated that this would result in a saving to the Exchequer of the order of £130 million in a full year.
(4) It is not possible to give a precise estimate of this cost. It is tentatively estimated, however, that the total annual cost could be in excess of £400 million.
(5) An estimated 13,000 single-income couples liable to income tax whose taxable income does not exceed £1,000 do not benefit from the doubling of the rate bands since they are already liable to tax only at the lowest rate of 25 per cent.