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Monday 01st of December 2008
October 10, 2007

Tax credits too complicated


by Kay Murchie
”Tax

A Whitehall report has said that tax credits are so complicated that MPs do not understand them, they added that they are fundamentally flawed, making children poorer and keeping parents out of jobs.

The Parliamentary Ombudsman said the tax credits have put families into debt and discouraged others from claiming the benefit or finding jobs. These opinions have come from Ann Abraham, who deals with the most serious complaints against the workings of Government.

Miss Abraham’s report will be a powerful blow against the £16 billion a year scheme that is already subject to criticism. Gordon Brown, then Chancellor, introduced tax credits in 1999 to lift millions of children above the poverty line.

They were introduced to give extra income for claimants, usually mothers, who work at least 16 hours a week with allowances for childcare. However, in 2006 the number of youngsters classed as poor increased by 100,000.

In addition, over 30% of payments have been wrongly overpaid and this has left millions of families facing demands for repayments that they are unable to pay. In the 12 months to the spring of 2006, 1,902,000 cases were overpaid.

Miss Abraham’s report questions the basic design of a system in which the credits are calculated a year at a time. She added that people cannot understand that money they are paid now may be an overpayment in the future if they get a job or a higher income later on. The report stated that overpayments and underpayments are unavoidable aspects of the tax credit system.

Judging from the level of complaints, it is clear that the system is not understood by many recipients and even their MPs said Miss Abraham.

Jane Kennedy, Financial Secretary to the Treasury said improvements have been carried out but acknowledged that more needs to be done.

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