TUC demands relief cap on high-earners

A cap on high-earners’ tax relief would be ‘a sensible way of raising funds’ to help reduce the national deficit, the Trades Union Congress has claimed.

Speaking at the organisation’s Beyond Crisis conference on the UK’s economy, general secretary Brendan Barber suggested that the Chancellor should raise £10 billion a year by limiting to £5,000 the amount of annual relief that can be claimed by individuals on £100,000-plus incomes.

Mr Barber went on to say that unlike other proposals to limit tax relief, such as ending higher-rate relief on pensions, his proposal would not affect higher-rate taxpayers earning less than £100,000 a year.

He also said that his suggested approach would be preferable to cuts in public services or to tax rises that hit poorer households, such as a VAT increase, and that it would help reduce opportunities for tax avoidance.

According to new TUC figures, 3.1% of the taxpaying population receives 31% of all tax relief, averaging £18,750 a year per person. After allowances are taken into account, the effective tax rate on income for those earning between £100,000 and £150,000 is 27.1%, while it is 30.5% for individuals with incomes between £150,000 and £200,000, and for those making more than £200,000 the effective rate is 31.8%.

These numbers shows that the tax system is only very mildly progressive for high-earners, claimed the unions body.

‘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,’ said Brendan Barber.

‘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 taxpayers, including many well up the income scale,’ claimed the TUC general secretary.

Categories: News , Income Tax