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British taxation system to take toll
Tue, 03 May 2011 11:48:17 GMT
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The British government's taxation system reforms will inflict damage on families with middle incomes and increase their taxes considerably, experts warn.

Experts with the Chartered Institute of Taxation have warned changes to tax credits and child benefit introduced by the coalition government to overhaul the country's economy, will only increase tax burden on families whose income is between £40,000 and £50,000.

These people as well as manufacturers, oil companies and banks will lose out under the new measures, said the experts.

The group said a considerable number of households where the sole earner is a higher-rate taxpayer are in the fourth income decile, meaning they already have a below-average income.

"The effective freezing of the higher-rate threshold, the proposed withdrawal of child benefit from households containing a higher-rate taxpayer, and the reductions in working tax credit - particularly the childcare element - will result in those households falling further down the income distribution", it said.

The group also warned that these changes would lead to middle-income households being "squeezed" proportionately more than those on higher incomes who did not receive tax credits.

The group added that taking low-income households out of the income tax net by raising the personal allowance would not necessarily make their households better off, once their loss of housing benefit and council tax benefit was also taken into account.

The Association of Chartered Certified Accountants also welcomed the reduction to corporation tax, but criticised the increase to the tax on profits made by oil and gas companies.

It said the sudden change came as a shock to the North Sea oil industry, and had been "widely condemned" as reducing the competitiveness of the UK as a target for investment.

The Chartered Institute of Taxation also criticised the tax rise for oil companies, while it warned that constant changes being made to the banking levy also needed to end.

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