Income taxes

This paper examines the impact of fiscal incentives on the level of R&D investment.

In 2003: the government will introduce new tax credits to provide financial support for children and low-paid workers: the integrated child credit and the employment tax credit. The reform to support for children aims to unify existing payments in a way that provides a guaranteed stream of income for those with children, whether they are working or not. The credit for people in work will provide an income top-up for low earners - something that those without children have not benefited from before. The government has not announced the impact of the reforms on the public finances, but both will cost the exchequer money, so this Commentary considers the likely sums involved. We also examine whether the reforms look like fulfilling their stated aims: making work pay, relieving poverty and creating a new type of state support that is simpler and less intrusive for claimants.

In the November 2000 Pre-Budget Report, the government announced a major range of measures for pensioners. Some come into operation in April 2001, while others follow in 2002 and 2003. The most important aspects of the package comprised: above-inflation increases in the retirement pension; substantially above-inflation increases in the means-tested minimum income guarantee (MIG); and the introduction of a new element into the means-tested benefit system for pensioners, known as the pension credit. Overall, the package means the government will pay over 4 billion a year extra to pensioners (2000 prices) by 200304. It represents a very substantial redistribution in favour of pensioners, and particularly those on low incomes.

This commentary discusses the rationale for directing financial support to families with children and assesses options for a new integrated child credit.

This Briefing Note reviews some of the major issues in the design and implementation of R&D tax credits. R&D tax credits have become a popular policy tool for encouraging R&D spending by business, with many countries offering subsidies of this form. Recent empirical evidence suggests that R&D tax credits are an effective instrument in stimulating additional R&D. However, in order to be desirable, a policy needs to be cost-effective and implementable.

In October 1999 WFTC replaced Family Credit as the main package of in-work financial support for families with children. This note compares the results of three IFS projects assessing the effectiveness of the WFTC in getting people back to work.