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01 Aug 2011
BATTLE LINES have been drawn between the Conservatives and Liberal Democrats over the abolition of the 50p tax rate.
Liberal Democrat Treasury minister Danny Alexander has labelled Lord Lamont and other Conservative members as living in "cloud cuckoo land", because they are calling for the removal of the 50p tax rate.
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Both the Treasury minister and business secretary Vince Cable said it would be wrong to focus tax cuts on the rich, The Guardian reports.
"The idea that we're going to somehow shift our focus to the wealthiest in the country at a time when everyone's under pressure is just in cloud cuckoo land," said Alexander.
One of the coalition agreements was to prioritise tax reductions for those on low and middle incomes according to Alexander.
Lamont has called for the removal of the rate as he believes it makes the UK uncompetitive compared to other European countries.
"The 50% higher rate of income tax is probably one tax which could be abolished without any effect on revenue," he said in a recent interview.
Chancellor George Osborne has requested HM Revenue & Customs calculate the amount of revenue generated from the 50p tax rate.
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Many commentators seem unaware that the first year in which we had a 50% tax rate was 2010/11. Much of the 50p rate tax payable for that year isn't due until 31 January 2012.
I'm no fan of the 50p top rate and have heard many business people reference it as a reason for moving overseas and for foreign executives refusing to come to London. With the addition of the 1% surcharge on high earnings the effect is that those high earners get to keep less than half of their bonuses etc. Psychologically this is bound to be demotivating.
BUT, as yet no one can say for certain how much additional tax will be collected re the first year in which the 50p rate operated.
Posted by: Mark Lee, 05 Aug 2011 | 12:20
Simple economic decision
The pros and cons of a tax need to be looked at - if the 50% tax rate raises enough revenue to fund tax reductions for lower earners and benefits for those who might not be employed by such people, then it should stay. It doesn't seem very likely though, does it?
Posted by: Stephanie Clackworthy, 07 Sep 2011 | 12:25
Abolishing the 50% Tax Rate
With National Insurance this rate is over 50%. Sadly I dont pay the rate and can not see that I will in the forceable future. However each time a high earner is exported becasuse of this rate we lose the tax for the next financial year and all the years after. The argument that the higher tax allows low paid a bigger persnal allowance is fair but misses the point that if the 50% tax payer has left the country and set up his business abroad those who may have had a job wont do and therefore can not benefit from the personal allowance. The UK spends too much on public services in comparson to its income and until a brave man makes a long term plan to reduce it the growth that we all hopeful will be slow in comming. The abolution of the 50% tax rate will take longer and more payers will move abroad.
Posted by: Paul Johnston, 08 Sep 2011 | 09:41