AN OUTSIDE VIEW

The Chancellor's decision to abolish the 10p tax band has provoked a rearguard action from MPs who have noticed that the changes will leave people on low earnings paying more. Their criticism, while justified, is missing the point. Income tax is a bad way to raise public revenue. Apart from being expensive and vulnerable to avoidance and evasion, it involves collecting information about individuals and their families and is an invasion of a fundamental right to privacy. Built into the system are perverse incentives, since it is effectively a fine on employing people to do work, because it forms part of the cost of employment. It was never intended to be the principal source of government revenue and thresholds were once high enough to ensure that only those with high incomes were liable for the tax. But because those thresholds were not increased to take account of inflation, even the poorest eventually became liable for income tax, which thus forms part of the so-called poverty tr...