Sir: Colin Brown ("First-time buyers may get tax break", 7 August) grossly underestimates the cost of restoring Miras to 25 per cent of interest, from its present level of 15 per cent for all borrowers. The overall cost of restoring Miras to its previous 25 per cent level would be nearer pounds 2bn than the pounds 900m suggested.
Increasing Miras to 25 per cent for first-time home-buyers would cost the Government a great deal of goodwill with other home-buyers who would be excluded. It will also cost the Exchequer not only the tax forgone on the extra relief but also the extra costs of administering a two-tier system.
Commentators cannot ask the Government to increase Miras on the one hand and reduce the basic rate of tax (every reduction of lp costs approximately pounds 2bn in tax revenue lost) on the other. If we are to have both an increase in the rate of Miras and a decrease in the basic rate of tax, the question must be asked, where is the money to come from?
In the past, reduced tax levels have led to increased compliance measures; in short, every reduction in the basic rate of tax has lead to an increase in the Inland Revenue's powers. Surely your commentators do not want to reduce the level of the basic rate of tax, and increase Miras to such an extent that the British public has no rights of resistance or privacy to the ever inquisitive Inspector of the Inland Revenue?
Corporate Tax Department
7 AugustReuse content