ABSTRACT
Personal tax payments (TYPP) are modelled as the basic rate of income tax (TPBR) times taxable income after subtraction of allowances. Taxable income is equal to personal disposable income (YPDY*) plus personal tax payments (TYPP) plus personal national insurance contributions (NIPE) but after deduction of tax-free transfer payments from the public sector (YPCG*). A proportion (TPAL/ERPR) of taxable incomes is then deducted to represent tax allowances. This personal tax allowance (TPAL) is calculated implicitly as the amount of allowance per worker that would cause the formula to yield the taxes that actually were paid. This procedure has the advantage of being much simpler than that adopted in the Treasury Model but on the other hand it makes no attempt to model the rest of the progressivity of the tax system. (It follows a suggestion by Ritchie, 1980, p. 19.)
(66) TPAL, the personal tax allowance, is then treated as exogenous.
