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Liberal Democrats call for personal allowance to rise beyond £10,000

March 10, 2012 2:04 PM
Originally published by East Midlands Liberal Democrats

Liberal Democrat Spring Conference today approved a motion calling for further and faster tax cuts for working people by raising the point at which you start paying Income Tax beyond £10,000 to the equivalent of the salary of a full-time worker on National Minimum Wage.

The motion set out a range of measures to pay for this, including the introduction of a Mansion Tax, a crackdown on non-doms and a General Anti-Avoidance Rule.

Commenting, Co-chair of the Liberal Democrat Parliamentary Treasury committee, Stephen Williams said:

"Nick Clegg has made clear the Liberal Democrats want to go further and faster when it comes to cutting taxes for working people.

"These are tough times and we know people are feeling squeezed. That's why we want to do the right thing and put money back in people's pockets.

"Liberal Democrats have always been clear our priority is tax cuts for people on low and middle incomes, not the rich.

"That's why we put this policy on the front page of our manifesto and it's why we want to go further and faster, raising the point at which you start paying tax beyond £10,000."

The proposal to raise the threshold further to the equivalent of full-time minimum wage would mean, with the minimum wage as it currently stands, as threshold of £11.86k (based on a 37.5 hour working week).

The full text of the motion is below.

Making Tax Fairer

Conference believes that the taxation system should be progressive and proportionate and that it should in particular ensure that:

I. Those earning the lowest wages are not disadvantaged by working.

II. Wealthy individuals and businesses make their fair contribution, as part of a tax system that seeks to reduce inequality and fund public services and national infrastructure.

Conference further believes that:

  1. A taxation system cannot be truly fair unless it is also green. The effects of pollution and carbon emissions disproportionately impact the poorest and most vulnerable in society.
  2. The environmental impact of goods and services is not adequately reflected in the current tax system.
  3. The tax system needs to be re-balanced so that pollution, carbon emissions and wealth are more heavily taxed and work is less heavily taxed.

Conference recognises that theUKfinds itself in a period of unprecedented economic uncertainty given the current global economic position and that environmentally sustainable economic activity needs to be supported.

Conference therefore welcomes the actions of the Coalition Government in:

i) Raising the income tax Personal Allowance to £8,105 for 2012/13, lifting over 1.1 million people out of tax altogether, and providing a tax cut for 25 million people.

ii) Prioritising this progressive measure over Conservative Manifesto proposals to raise the inheritance tax threshold to £1m for the benefit of just the richest 2% of all estates.

iii) Introducing a bank levy that raises £2.5bn in each and every year of the Parliament, compared with Labour's one-off bonus tax that raised just £2.3bn.

iv) Limiting the amount of tax relief on pension contributions for the highest earners, which will raise over £4bn per year by the end of the Parliament.

v) Raising the Capital Gains Tax rate to 28% for higher rate taxpayers.

vi) Cracking down on tax avoidance and evasion, by investing £900m that will bring an extra £7bn in tax each year by the end of the Parliament.

vii) Tackling the abuse of non-domicile status byUKresidents by increasing the annual levy to be paid by those non-domiciled individuals who have been resident for 12 years to £50,000.

Conference calls for further action in lifting the lowest paid out of taxation altogether, and supportingUKeconomic activity andUKemployment by:

A. Raising the Personal Allowance to £10,000 as set out in the Coalition Agreement as quickly as possible, and in the longer term as resources allow raising it to the level implied by full-time work on the minimum wage and ensuring that it remains linked to minimum wage.

B. Ensuring that the tax system supports SMEs and new businesses throughout the country as the Government continues to rebalance the economy away from an overdependence on financial services, for example though National Insurance incentives for small businesses.

C. Ensuring that action to tackle the record deficit inherited from Labour continues to be taken fairly by ensuring that those with the broadest shoulders continue to make the largest contribution.

Conference also calls for the following immediate steps to ensure that wealthy individuals and businesses pay their fair share of tax and to help fund the proposals above, including:

1. Introducing a 1% annual levy on the value of the property that exceeds £2m for residential properties (uprated periodically for house price increases) with a deferral mechanism for those who may be asset-rich but income-poor; we anticipate that less than 0.1% of people would be affected by this tax.

2. Further limiting tax relief for payments into pension funds, which currently offers the greatest benefit to higher rate tax payers.

3. Further action to tackle tax avoidance, through:

a) A General Anti-Avoidance Rule aimed at transactions for which the sole commercial purpose is the avoidance of tax.

b) Reduction of stamp duty avoidance including by the use of companies to holdUKproperty.

c) Ensuring that those non-domiciled individuals who have beenUKresident for 7 out of the last 10 years are subject to tax on all offshore income in the same way asUKdomiciled British citizens.

d) Ensuring that international businesses including internet based companies pay fair tax which reflects their revenue generated from theUK.

e) Extending the scope of inheritance tax by lengthening the period for which gifts made by a donor before death are potentially exempt from inheritance tax from the current seven to fifteen years.

4. Arguing through international bodies for a global Financial Transaction Tax.

Conference resolves that the wealthy and those with the very highest incomes should make the greatest proportionate contribution to the tax measures necessary for the reduction of the structural budget deficit and that the Additional Income Tax Rate of 50% on the top 1% of earners is needed to achieve this.