Tax Relief 'For Rich' Attacked

The TUC is to tell the Chancellor that he should raise £10 billion a year by capping the amount of tax relief that can be claimed by those earning more than £100,000 a year at £5,000.

Speaking at the TUC's Beyond Crisis conference later today, TUC General Secretary Brendan Barber will say that the economy is still far too fragile to start reducing the deficit and when the time comes to do so it would be grossly unfair to make those who did least to cause the crash pay the price.

Rather than cuts in public services or tax rises that hit poorer households - such as a VAT increase - the Government should repair the public finances by making those who did best from the boom pay a fairer share of tax.

The TUC says this should include a limit on the tax relief that those earning more than £100,000 a year can claim each year, which the TUC believes are often abused through tax avoidance schemes.

New TUC analysis shows that 3.1% of the taxpayer population receive 31% of all tax relief, averaging £18,750 a year each. The analysis shows that the tax system is only very mildly progressive for this group.

After allowances are taken into account the effective tax rate on income for those earning between £100,000 and £150,000 is 27.1%, 30.5% for those earning between £150,000 and £200,000, and for those earning over £200,000, 31.8%.

Capping the amount that those earning more than £100,000 can claim in allowances at £5,000 would raise £10 billion a year and therefore make a significant contribution to closing the deficit, says the TUC.

Unlike some other proposals to limit relief such as ending higher-rate tax relief on pensions, this proposal would not affect higher-rate tax payers earning less than £100,000 a year.

People earning between £70,000 and £100,000 on average claim £4,500 in tax allowances, so a £5,000 limit for those earning more than £100,000 seems a fair limit, the TUC says.

TUC General Secretary Brendan Barber will tell the Beyond Crisis conference, (which is also to be addressed by Dr Rowan Williams, the Archbishop of Canterbury): "When the time comes to close the deficit - and that will only be when there is a strong recovery - it will be only fair to ask those who did so well out of the boom years to make a fair contribution.

"Putting a £5,000 cap on the tax relief that can be claimed by those earning over £100,000 a year is not just a sensible way of raising funds, it would also remove much of the scope for tax avoidance on income and make the tax system fairer.

"The super-rich have got better and better at getting out of paying tax, and this closes a whole set of loopholes at a stroke, without affecting the great majority of tax payers, including many well up the income scale.

"The fact that we can raise such a lot of money simply by asking the top one per cent to pay a little more shows just how unequal our society now is," he said.

(BMcC/GK)