asked the Minister for Finance the amount of revenue which would be foregone if the top rate of income tax was reduced from 58 per cent to 50 per cent and the amount of revenue which has been foregone since the reduction of the top rate of income tax of 77 per cent in 1977, of 65 per cent in 1983 and since the reduction of the top rate of tax from 60 per cent to 58 per cent in 1986-1987.
Written Answers. - Income Tax Reductions.
37.
The full year cost, estimated by reference to the 1989-90 tax year, of a reduction in the top rate of income tax from 58 per cent to 50 per cent is estimated at £75.2 million.
The relevant statistics relating to the cost in terms of tax foregone of the reductions in the top rates of tax from 77 per cent, 65 per cent and 60 per cent are available only in respect of the income tax year ended 5 April 1981 and subsequent years. The following table sets out tentative estimates of the revenue which would have accrued to the Exchequer if a 77 per cent rate had been applied as the top income tax rate for each year instead of the actual top rate in force for that year. It should be noted, however, that there were substantial changes, for example in the number and size of tax bands, over the period in question which were taken into account in deciding the top rate of tax to apply in those years and which influence the estimated yield from substituting a top rate of 77 per cent in those years. In addition, the figures in the table are compiled on the basis that application of a 77 per cent rate would not have altered the behaviour of taxpayers subject to it; this assumption is unlikely to be realistic.
TABLE
|
Year ended 5 April |
Top tax rate in force |
Estimated full year yield to the Exchequer if top rate had been 77 per cent |
|
% |
£million |
|
|
1981 |
60 |
16 |
|
1982 |
60 |
15 |
|
1983 |
60 |
42 |
|
1984 |
65 |
26 |
|
1985 |
65 |
30 |
|
1986 |
60 |
119 |
|
1987 (p) |
58 |
149 |
|
1988 (p) |
58 |
180 |
|
1989 (p) |
58 |
152 |
(p) indicates provisional figures which are subject to revision.