Think tank says taxing rich is ‘counter-productive’

The Institute of Fiscal Studies says increasing tax for the rich is unlikely to raise extra revenue

Written by AccountancyAge.com

Accountancy Age, 21 Apr 2008

The Institute for Fiscal Studies says fresh ‘albeit tentative’ evidence has revealed ratcheting up income tax rates for those earning more than £100,000 is likely to be counter-productive.

The latest IFS study calls for a radical makeover of Britain’s tax credit and benefit system, noting tax cuts are needed for low income earners, who face weak work incentives, the Financial Times reports.

Mike Brewer of the IFS told the FT that raising tax rates for the highest income earners was likely to lead to less returns as the higher taxes stopped them from working as hard and encouraged them to go abroad or to engage in more aggressive tax planning.

The research was commissioned by the Mirrlees Review of the British tax system, chaired by Nobel Prize-winner Professor Sir James Mirrlees for the IFS, but its conclusions may not necessarily be adopted in the final report.