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Call for flat-rate tax as ‘child benefit changes bite’


Chancellor George Osborne is being urged to consider a new, flat-rate of income tax following concerns over the impact of child benefit cuts on middle income families.


In an interview with Sky News, Simon Walker, head of the Institute of Directors (IoD), claimed that some middle earners are now paying effective rates of more than 70% as a result of the child benefit reforms.


As announced in the 2012 Budget, from 7 January 2013 child benefit was gradually clawed back for individuals with income between £50,000 and £60,000 a year, by means of the new High Income Child Benefit Charge. Where either parent earns over £60,000 the benefit is fully eroded.


Mr Walker said this had resulted in hard-pressed families being hit with large ‘marginal’ tax rates. ‘This is a huge disincentive as it is for beneficiaries on the lowest wages – some of them can be paying 70%, 75%,’ he commented.


The business leader has now called on the Chancellor to address the problem by introducing a simple, flat rate of tax.


‘I would like to see that there is a level above which the tax take should never rise, so you should never pay more than 50p on the pound you bring in. If you are doing that you are doing something that is wrong and that degrades the motivation to work.


‘I am all for a flat simple tax system – it has been shown to raise a lot more money. The top 1% of taxpayers pay 15% of all the tax in this country. Flat, simple taxes are the way to do it’.