Money
Paul Lewis on the web
Labour's 'tax secret' - low earners could suffer
A hundred wealthy people will have to pay an estimated £200 million in tax and penalties after the Revenue paid £100,000 for details of bank accounts in a Liechtenstein bank LGT, writes Paul Lewis
They may have £3 billion hidden away in accounts they thought were protected by the strict rules of banking secrecy in the European micro-state. But that was blown when an ex-employee of the bank, which is owned by the country's Royal Family, took the details with him and sold them to tax authorities in Europe and America.
Most people won't weep at the thought of a few wealthy tax dodgers being forced to pay the tax they owe. Some could even be jailed. And an extra £200 million will be very helpful when Alistair Darling presents his first Budget on March 12. But Labour has still not come clean about its own tax secret.
Unless the new Chancellor reverses them, changes due to start in April will take money from poor households and give it to rich ones.
Under these Robin Hood-in-reverse plans, announced a year ago in his swansong Budget by Gordon Brown, people under 65 on low incomes will pay up to £181 more tax in 2008/09, while those on high incomes will pay up to £788 less. Some whose income is wholly from investments will gain even more.
The change stems from Gordon Brown's dramatic decision in his last Budget to cut the basic rate of tax from 22p in the pound to 20p, the lowest it has been for 75 years. But the £8 billion cost of making this radical change had to come from somewhere. And most of it came from scrapping the lower 10 per cent rate of tax on the first £2,230 of income.
In effect, that doubled the lower rate from 10 per cent to 20 per cent, putting up the tax on that slice of income by £223. For most people the cut in the basic rate will save them more tax than that. But people with an income up to about £15,000 from a job (who pay National Insurance contributions) or £16,500 from a pension will end up worse off. That's because the extra 10 per cent tax at the lower rate will cost them more than they save from the two per cent cut in the basic rate.
An exception to these rules has already been made for people whose income comes from savings. They will still pay a lower rate of 10 per cent on some of that, if the income above their tax allowance is all from savings.
Now that Chancellor Alistair Darling has another £200 million from Liechtenstein bank accounts to play with, he has just three weeks before his first Budget to work out how to extend that help to others on low income; those who are being robbed so that wealthier people can keep more of their money.
That's a Labour Government secret he can't keep quiet about for much longer.
