Labour's 50p tax rate 'could cost the country £350bn', Osborne warned

Written by Jason Groves

Chancellor George Osborne was under fresh pressure to scrap Labour’s 50p tax rate last night after a report warned it could deprive the Government of £350billion of tax revenue in a decade.

The ‘politically-motivated’ tax rate on earnings over £150,000 would reduce economic activity by 19 per cent over the same period, the study found.

The Adam Smith Institute report warned this could cost the Government billions in lost tax revenue. It also called for the main higher-rate income tax level to be cut from 40 per cent to 35 per cent, to make Britain more competitive. Britain’s top tax rate is now one of the highest in the world, the study added.

Tom Clougherty, executive director of the Adam Smith Institute, said: ‘The Government says the forthcoming Budget will be all about growth, but no amount of tinkering around the edges will make up for the fact that we have an extremely uncompetitive tax regime, which is increasingly making hard-working entrepreneurs wonder why they bother.’

'Yes, we need to balance the budget - but high taxes are not the way to do it. What we need to do is couple a smaller, more efficient public sector with a dynamic, enterprise economy.'

The report cited surveys suggesting that up to 43 per cent of financial services professionals and 23 per cent of companies in the sector – which provided £66billion in tax receipts in 2009 – have considered leaving the UK. And it warned that, even if they do not leave the country, many high-earning wealth-creators are likely to work less, retire earlier and put more money into tax shelters if they feel they are being asked to hand too much over to the tax man.

The report's authors Peter Young and Miles Saltiel said research showed that 'the behavioural response to the new higher rates of tax is strong and that this is bound to hurt tax receipts,'.
They added: 'While many people saw the previous top rate of income tax as too high at 40 per cent, most put up with it.
'The same cannot be said of the new 50 per cent top rate, which on the evidence constitutes a tipping point.'

Former Tory Cabinet minister John Redwood last night urged Mr Osborne to act on the report's findings.

Mr Redwood said: 'We all want to get the rich to pay more tax but the way to do that is to have a competitive tax rate. I don't think the 50p rate - or 52p with the extra National Insurance - is the optimum rate for raising tax and I hope that the Chancellor will now look at this again.'

You can read it in full in the Daily Mail here.

Slug path

asi-in-the-news/asi-in-the-news/labours-50p-tax-rate-could-cost-the-country-p350bn-osborne-warned

Joomla-id

6286

Old Teaser

10 March 2011

The Daily Mail writes on the negative financial costs of the 50p tax rate following the release of the Adam Smith Institute's report, claiming it will result in less revenue.

British brain drain strikes again

You can read the article here.

Slug path

asi-in-the-news/asi-in-the-news/british-brain-drain-strikes-again

Joomla-id

6284

Old Teaser

10 March 2011

Dr Eamonn Butler argues in the Wall Street Journal that the government needs to cut taxes, particularly the 50p and non-dom taxes, in order to avoid a brain drain and balance the government's books.

50p tax rate will cost UK government £350billion

 10 March 2011

· The Adam Smith Institute’s latest report calls on the Chancellor to scrap the 50p tax rate

· If the government continue with it, the 50p tax rate will lead to flat growth for a decade and reduce tax receipts by £350bn over that period

In a new report released today (Thursday) the Adam Smith Institute have calculated the negative effects of the top UK tax rate and called on the coalition government to scrap the 50p tax rate in this year’s budget. If the government keeps the 50p rate it will have highly negative effects, leading to lost revenue of £350billion or more, as well as flat economic growth.1

The report points out that the UK has become one of the most highly taxed countries in the world. Evidence from overseas shows that high top tax rates fail to produce public revenues and injure economies. The introduction of the 50p tax rate, along with the 40% higher tax rate band and high CGT levels, has stifled our competitiveness and economic growth.

Tax rates are above revenue-maximising levels and if they remain high then this will affect the behaviour of wealth creators in the UK. There has already been some emigration from the UK finance industry and the Institute’s research suggests the high tax rates will lead other wealth creators to emigrate or seek other routes to minimise their tax liability.

In the report, The Revenue and Growth Effects of Britain’s High Personal Taxes, authors Peter Young and Miles Saltiel recommend that the 50p tax rate should be scrapped to make the UK a more internationally attractive place for business. They also suggest the Chancellor should eliminate the revenue-losing £30,000 non-dom charge immediately; reduce the higher rate of income tax from 40% to 35% and announce an intention of further reductions over time; reinstate the personal allowance that is currently phased out between £100,000 and £115,000; and reduce the level of Capital Gains Tax.

Dr Eamonn Butler, director of the Adam Smith Institute said:

“It's not that high fliers can't afford a 50p tax rate. It's just that they quite understandably resent governments grabbing half of everything they earn. That is why they are falling into the open arms of our competitor countries, who make them feel far more welcome.”

Tom Clougherty, executive director of the Adam Smith Institute, added:

“The government says the forthcoming budget will be all about growth, but no amount of tinkering around the edges will make up for the fact that we have an extremely uncompetitive tax regime, which is increasingly making hard-working entrepreneurs wonder why they bother. Yes, we need to balance the budget – but high taxes are not the way to do it. What we need to do is couple a smaller, more efficient public sector with a dynamic, enterprise economy. Scrapping the uneconomic, politically-motivated 50p tax rate would great start.”

You can read the full report here.

Slug path

50p-tax-rate-will-cost-uk-government-p350billion-

Joomla-id

6280

Calls for higher National Minimum Wage are dismissed as ludicrous

Read in full in City AM here.

Slug path

asi-in-the-news/asi-in-the-news/calls-for-higher-national-minimum-wage-are-dismissed-as-ludicrous

Joomla-id

6258

Old Teaser

28 February 2011

The Adam Smith Institute reacts in City AM to calls by the Social Market Foundation to increase the minimum wage.