Campaign gets sympathy[QQ] Your story on the proposed pensioner tax credit (Pensioners face tax blow, 23 November, page 1) made me sympathise with the government’s campaign against unfair reporting.

The proposals will reduce the effective marginal tax rate faced by some pensioners from 100% to 40%, by allowing them to keep 60p in every #1 of additional income earned rather than withdrawing benefit pound for pound as happens now.

There is no question of those affected paying higher-rate tax and no pensioner will be worse off as a result of the changes. How this could be said to constitute a ‘tax blow’ and why it was felt necessary to describe the higher rate band as ‘the same 40% rate as millionaires’ escapes me.

Francis Evans, Herefordshire

Give us back the money

When will somebody take the time and trouble to point out to the chancellor that the huge reserves he is holding are as a result of accelerated payments of both income tax and corporation tax. Indeed, a large part of its money, which he is holding for sole traders and partners in businesses, is not actually Inland Revenue money.

As regards the income tax, I am referring to what is known as transitional relief. This is the duplication of profits taxed to the taxpayer in the first year of self-assessment. Its title is self-descriptive. It is repayable to the tax payer when he ceases to be self employed person and it will be repaid in depreciating pounds and in the meantime he is not receiving any interest on the money.

As regards limited companies, if their projected profits are in excess of £1.5m they are now required to pay corporation tax on account for a period of 18 months earlier than has been the case in the past.

No business could survive if it adopted those accounting policies.

Harold James, North Somerset

Are we too stubborn to move forward?

I read your article (Comment, 16 November, page 2) by Sir Geoffrey Howe, ex-chancellor, with great interest.

I have been involved with UK taxes for the past 25 years. I find that we all enjoy the annual ritual of the red book (Budget) and the amusement that we get from the very complexity of tax structure and tax law, the semantics, the nuances, the case law, etc. etc.

We have become creatures of habit. We must now reflect upon this behaviour for the past 25 years, and realise that partly because of this complexity and bureaucracy, we have lagged behind in productivity compared to USA (40%), Germany (10%) and France (20%).

Our standard of living is also below these countries. It will require many ruthless reformers to break this culture.

I believe the annual Finance Act should be changed to every three years.

So should the Budget and the Spending Review.

We shall than have less of a boom and bust scenario.

Nagin Khajuria, FCCA, London

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