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Thursday, 12 July, 2001, 10:37 GMT 11:37 UK
Saatchi urges tax 'independence war'
Income tax form
The tax system hits the poorest, says the report
A new "war of independence' should be waged on Britain's tangled tax and benefits system, argues a new report from a right-wing think tank.

Conservative Treasury spokesman Lord (Maurice) Saatchi and economist Peter Warburton want to stop eight million of the least well-off from paying any income tax.

It is outrageous that 3.6m people who earn less than half the national average should pay any tax at all

Lord Saatchi and Peter Warburton
The pair say their plans would bring forward tax "independence day" - the time of the year when people stop paying tax and start earning for themselves - by five days.

Their report, Poor People! Stop Paying Tax, was published on Thursday by the Centre For Policy Studies, the think tank set up by Margaret Thatcher and Keith Joseph in the 1970s.

New tax yardstick

Tax levels are currently measured as a share of gross domestic product (GDP) - the value of goods and services produced by the country each year.

Lord Saatchi
Saatchi calls for a war of independence on tax
The report says the system is too complicated and urges for the "independence day" yardstick to be used instead "to focus attention on the true level of tax paid".

The day has moved from 27 May to 10 June since Labour came to power, say Lord Saatchi and Mr Warburton.

Their plans would bring that date forward five days and cut the official tax burden from 38% to 36.5% of GDP, they claim.

'Outrageous system'

The report says the income tax threshold should rise from the current 4,385 to 10,000.

"It is outrageous that 3.6m people who earn less than half the national average should pay any tax at all," according to its authors.

That means the government has to hand out an extra 3bn in benefits.

Gordon Brown
Brown has been criticised for making the system too complex
"The government first taxes people on low incomes. Then it means-tests their income.

"Then it offers them benefits to restore their income back to where it was before they paid the tax. Then, finally, it taxes some of the benefits.

"A radical simplification is needed, in which the tangled web of benefits and credits is simply exchanged for lower tax."

The change would not affect government spending or income and its ultimate aim would be to ensure people are either paying tax or receiving benefit, not doing both at the same time.

The writers say the new system would be fairer as the poorest 10% of British people currently pay between half and 63% of their incomes in tax.

Too complex

Lord Saatchi and Mr Warburton say the "joy" of their proposal is its simplicity.

Economic commentators and opposition politicians have accused Chancellor Gordon Brown of making the tax system too complicated and difficult to understand.

And the Conservatives have continually attacked the government for imposing "stealth taxes".

Mr Brown did put a 1bn tax give-away into his March budget, including an extension of the 10p tax rate.

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See also:

08 Mar 01 | Business
Not much of a giveaway
05 Jul 01 | Business
Taxman's missing 2bn
21 May 01 | Vote2001
Tax row blazes
15 May 01 | Vote2001
Tories struggle with tax row
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