THE BUDGET AND P.A.Y.E.
SIR,—Sir John Anderson in his Budget speech offers some consolation to the wage-earners of this country by suggesting a relief in the reduction of income-tax at some later date. It has been hinted in the Press that taxation may be reduced from los. to 8s. in the £, but have those who make such suggestions stopped to consider what this means? Such a reduction, or for that matter any change in the standard rate, would involve the preparation and printing of millions of new tax tables which would take so long to accomplish that the reduction could not be effected until some time after announcement. This time-lag is important, as it would nullify the essential factor of a quick change-over necessary to forestall obvious methods of tax evasion.
Surely a simple and quick method of reducing the rate of income-tax would be to re-code everyone on a given date. Employers could be instructed to increase codes covering an agreed extra allowance which in turn would automatically reduce the rate of tax in the £. I foresee some objection to the psychological reaction of this method in that the standard rate remains at los. in the £, but this could be over- come by well-planned and careful explanation to the taxpayers. Again, this operates only on Schedule E—the schedule with which P.A.Y.E. is concerned—so that in order to reduce taxation generally it would be necessary to consider different forms of relief on the other schedules, but this should not be a difficult task.
The advantages of the re-coding method for Schedule E are that the Chancellor retains his element of surprise so necessary in our Budget system, it is simple and immediately effective, and it saves time, labour
and material.—I am, Sir, yours faithfully F. G. ELLIOT.
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