Parliament: Tax - Tax credit `unworkable'

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THE GOVERNMENT'S plan to introduce a new tax credit for low-income families, the centrepiece of March's Budget, came under attack yesterday from MPs on the House of Commons social security committee.

The committee's report on the Working Families Tax Credit (WFTC) warned of difficulties in implementing the plan.

The MPs also criticised officials for being unable to answer questions about how the tax credit would work in practice, although they welcomed the principle of boosting the rewards of work.

The new credit is due to be introduced in April 2000. The main concern outlined in the report was whether employers, who will have to administer the WFTC through the payroll, will be able to do so on time.

The timetable is madetighter by the Government's failure to decide on details such as how to pay the credit to thosewith more than one job or to those who change jobs.

"We regret that officials were not more forthcoming in discussing the range of options being considered in areas where no final decision had been made," the report said.

The list of detailed criticisms of the WFTC, which will replace Family Credit as the income top-up for low earners, is all the more significant because business resistance led to the defeat in the House of Lords of a similar proposal by the Conservative government in 1988. This led the Tories to opt for Family Credit, a social security benefit, rather than a tax credit.

Employers' organisations which gave evidence to the social security committee on the WFTC were unanimous in criticising the plan.

They objected to the administrative burden, especially for small companies, and to the need for employers to find out details of employees' personal circumstances.

The committee concluded: "The concerns of employers, coupled with the difficult questions which still have to be resolved, lead us to propose that the Inland Revenue should address with some urgency the practical difficulties of implementation within the current timetable."