The tax and price index

Bell, David N.F. and Emmett, Gary and Fraser, Neil and Jowett, Anne and Kirwan, Frank X. and McGilvray, James W. and McNicoll, Iain H. and Moar, Lyle and Orton, Ian and Simpson, David R. F. and Wingfield, A. A. (1979) The tax and price index. Quarterly Economic Commentary, 5 (2). pp. 29-30. ISSN 0306-7866

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A feature of this year's Budget was the shift in emphasis from direct taxation to indirect taxation. The annual yield of income tax has been reduced by £4½ billion while that of direct taxes was increased by a similar amount. It must be acknowledged that the new tax and price index has a number of deficiencies. It is only applicable to a proportion of the population, namely those who pay tax and whose gross income is less than £10,000 per annum. It takes no account of the social wage, nor of changes in benefits, such as the recent restructuring of child allowance. It smoothes out tax payments over a full year even though, for administrative reasons, these may fluctuate widely from month to month. This brief paper explores some of these deficiencies in more detail and assess their impact on taxation.