The government's proposed reforms to the child benefit system would create effects that are "bizarre and economically damaging", the Institute for Fiscal Studies (IFS) has said.
Tax planning and non-compliance to avoid losing child benefit will reduce the government's saving of £2.4bn by £340m, the IFS said in its Green Budget 2012.
The organisation has proposed three alternatives to the reform, which it said would prevent incentivising families to reduce their earnings in order to keep their benefits.
The government has proposed to withdraw all child benefit from any family containing a higher-rate taxpayer.
This will remove 1.5m families from the benefit altogether, although David Cameron has said the government is reconsidering its reforms after a public outcry.
The IFS has put forward alternatives to the government's unpopular plans.
The IFS' biggest concern is the "cliff edge" created by using the higher-rate income tax threshold to assess eligibility for child benefit.
The higher-rate threshold will be £42,735 in 2013/14, which, for a person living with a child benefit recipient who is not a higher-rate tax payer, means a rise in earnings of just £1 per year will trigger the loss of at least £1,000 per year in child benefit.
Alternatively, families in which one adult earns slightly more than £42,735 per year could increase their income through child benefit by at least £1,000 by finding a way to reduce their taxable income.
The organisation added Her Majesty's Revenue and Customs (HMRC) does not know which families will need to have child benefit withdrawn and so the new system will rely on people who live with higher-rate taxpayers to inform the Revenue themselves.
There will also be problems caused by the assessment of child benefit and the assessment of income for tax, as the former is assessed weekly whilst the latter is done annually.
This will make it difficult to administrate benefits for people whose family circumstances change within a year, the IFS said.
The government could consider withdrawing child benefit more gradually, tapering the benefit away as earnings rise instead of the cliff edge approach, the IFS said.
It also suggested the integration of child benefit with child tax credit, but withdrawing it at a separate taper so the withdrawal would be 6.66%.
Child tax credits capture the family's total income, not just that of one member, addressing the inequalities in the government's plans, the IFS said.
If child benefit and child tax credit were merged without a new taper, far more families would be taken out of child benefit than under the government's current proposals, the report said.
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