Proposed tax reforms and paper entitled Facing the Future

1240/5(2072)

QUESTIONS TO BE ASKED OF THE PRESIDENT OF THE FINANCE AND ECONOMICS COMMITTEE ON TUESDAY, 16th MARCH 2004 BY DEPUTY G.P. SOUTHERN OF ST. HELIER

Question 1

In response to a question on 2nd March 2004, on the phasing out of allowances for households with high earnings, the President stated that the level of proportional reductions in allowances for single-person households had not been decided. Would the President inform members –

( a ) why, in the Committee's paper Facing the Future', the table on page 6 indicates clearly that extra

income tax for a single person would start at £40,000 p.a., producing an additional £345 of tax payable on an income of £50,000?

( b ) w h e ther these reductions in allowances will totally remove all mortgage interest relief on those

single person households with income over £75,000 and couples with joint incomes of £150,000?

( c ) w h e ther he considers these measures on mortgage interest relief will effectively negate the measures adopted by the Assembly in the Budget 2004 on capping mortgage interest relief at £300,000?

Answer

1. The level of proportional reductions in allowances for single-person households has not been formally decided. This is an indicative proposal.Indeed, even the£150,000 proposed for a two personhouseholdis still only a suggestion putout for consultation. The Facing the Future'paper gave an indication of the additional tax that would be paid bysingle-personhouseholdsshould this proposalbe formally adoptedand agreed by the States Assembly. I appreciate that there are potential anomalies and if the Deputy ,oranybody else, has proposals for a moreappropriate level at whichtheallowancesforsingle-personhouseholdsshould be phased out, without creating theanomalyandinequityof an unmarriedcouple living togetherhaving a higher level ofphase out for allowances than a married couple, I should behappy to receive them.
2. Yes.
3. No. Relief, on upto£300,000, remains wholly or partly available for thosehouseholds with incomesbelow £150,000.

Question 2

Will the President produce for members a table showing the gross household income over the range £40,000 to £150,000, in £10,000 intervals, the additional tax that would be paid by a single person, a couple with no children and a couple with two children with, in each case –

n o mortgage

a m ortgage of £120,000 a m ortgage of £200,000 a m ortgage of £300,000?

Answer

On the basis of the Committee's current draft proposals the additional tax payable would be as follows – a s ingle person with –

n o mortgage

4 0 ,0 0 0 n i l

5 0 ,0 0 0 3 4 3

6 0 ,0 0 0 6 8 6

7 0 ,0 0 0 1 , 029 8 0 ,000+ 1 , 200

a m ortgage of £120,000

4 0 ,0 0 0 n i l

5 0 ,0 0 0 6 8 6

6 0 ,0 0 0 1 , 373 7 0 ,0 0 0 2 , 059 8 0 ,000+ 2 , 400

a m ortgage of £200,000

4 0 ,0 0 0 n i l

5 0 ,0 0 0 9 1 5

6 0 ,0 0 0 1 , 830 7 0 ,0 0 0 2 , 745 8 0 ,000+ 3 , 200

a m ortgage of £300,000

4 0 ,0 0 0 n i l

5 0 ,0 0 0 1 , 201 6 0 ,0 0 0 2 , 402 7 0 ,0 0 0 3 , 603 8 0 ,000+ 4 , 200

a c ouple with no children – n o mortgage

u p t o 8 0,000  n il 9 0 ,0 0 0 2 4 6

1 0 0,000 4 9 2 1 1 0,000 7 3 8 1 2 0,000 9 8 4 1 3 0,000 1 , 230 1 4 0,000 1 , 476 1 5 0,000 1 , 720

m ortgage of £120,000

u p t o 8 0,000  n il 9 0 ,0 0 0 4 1 8

1 0 0,000 8 3 6 1 1 0,000 1 , 254 1 2 0,000 1 , 672 1 3 0,000 2 , 090

1 4 0,000 2 , 508 1 5 0,000 2 , 920

m ortgage of £200,000

u p t o 8 0,000  n il 9 0 ,0 0 0 5 3 2

1 0 0,000 1 , 064 1 1 0,000 1 , 596 1 2 0,000 2 , 128 1 3 0,000 2 , 660 1 4 0,000 3 , 192 1 5 0,000 3 , 720

m ortgage of £300,000

u p t o 8 0,000  n il 9 0 ,0 0 0 6 7 5

1 0 0,000 1 , 350 1 1 0,000 2 , 025 1 2 0,000 2 , 700 1 3 0,000 3 , 375 1 4 0,000 4 , 050 1 5 0,000 4 , 720

a c ouple with 2 children – n o mortgage

u p t o 8 0,000  n il 9 0 ,0 0 0 3 8 9

1 0 0,000 7 7 8 1 1 0,000 1 , 167 1 2 0,000 1 , 556 1 3 0,000 1 , 945 1 4 0,000 2 , 334 1 5 0,000 2 , 770

a m ortgage of £120,000

u p t o 8 0,000  n il 9 0 ,0 0 0 5 6 1

1 0 0,000 1 , 122 1 1 0,000 1 , 683

1 2 0,000 2 , 244 1 3 0,000 2 , 805 1 4 0,000 3 , 366 1 5 0,000 3 , 920

a m ortgage of £200,000

u p t o 8 0,000  n il 9 0 ,0 0 0 6 7 5

1 0 0,000 1 , 350 1 1 0,000 2 , 025 1 2 0,000 2 , 700 1 3 0,000 3 , 375 1 4 0,000 4 , 050 1 5 0,000 4 , 720

a m ortgage of £300,000

u p t o 8 0,000  n il 9 0 ,0 0 0 8 1 8

1 0 0,000 1 , 636 1 1 0,000 2 , 454 1 2 0,000 3 , 272 1 3 0,000 4 , 090 1 4 0,000 4 , 908 1 5 0,000 5 , 720

These answers assume that the wife is not working and that the two children are not in further education. It also assumes an interest rate of 5% on the mortgages.

Question 3

Would the President give an estimate of what proportion of mortgage interest relief will be affected by these measures at the levels suggested by the Committee?

Answer

It is not possible to give an accurate answer to this question because the Comptroller of Income Tax only collates and produces statistics which fall naturally out of the tax assessing and tax collection processes. It would require very significant research and an analysis of every single personal and corporate tax file at the Income Tax Office to give an accurate answer to this question. The time and resources that would be required are not available.

My personal view, which I must stress is not backed by any statistical evidence, is that on the basis that most mortgages over £300,000 are taken out by married couples, and that the household income survey shows an income profile predominately below £80,000 per annum, only a small proportion of the total figure of mortgage interest tax relief will be affected.