THE UK has gone against the global trend for reducing income tax over the past two decades.
UK income tax rates for high earners have risen by 4% compared to the global average cut of 5.6%. The UK is one of the few global economies that has increased the income tax rate.
The high earners have incomes succeeding $1m (£810,600) and the rate is 43% today compared to 39% in 1996, according to a study by UHY Hacker Young. Canada was the other major economy to raise income for this earning bracket, at just 0.3%.
However, the taxpayers in the UK on a lower income bracket of $30,000 (£24,300) have benefited from the cuts, with their tax bills reduced by 9% since 1996, the global average is still less, at 11%. The news comes as MPs urged for income tax cuts earlier this year.
Mark Giddens, partner at UHY Hacker Young, commented: “The argument made, by some, is that high taxes for higher earners reduces the incentives for those top earners and entrepreneurs to work harder and create more wealth and jobs. While those on lower incomes have seen an improvement, the amount of tax high earners should pay has been the subject of fierce debate. Even those on more modest incomes, the so-called “squeezed middle”, have felt the pinch, with a decrease in their disposable income.”
The average global income tax rate for taxpayers in the same high income bracket has fallen from 41.4% to 35.8% over the same period, and the European average decreased from 49% to 41%. Russia and India saw the biggest cuts of any major economies for higher earners falling from 35% to 13% and from 51% to 34% respectively.
UHY studied tax data in 26 countries across its international network. The study also revealed that UK GDP has grown by 95% in the past three decades, compared to the global average of 135% GDP growth.
Giddens added: “Although it is obviously only one factor amongst many, some analysts have suggested that lower tax rates may contribute to an improved rate of GDP growth.”
Signed into law by president Barack Obama in 2010, the Dodd-Frank legislation has tightened regulation of the US financial system
Just when SMEs thought they knew the lie of the land in terms of the Brexit timescale, Theresa May has caught them by surprise. Salvador Amico of Menzies asks how SMEs should react to the news of a snap election on 8 June
With the general election on 8 June, CIOT has warned against rushing through extensive legislation without adequate scrutiny and an appropriate timeframe to make necessary amendments
Yet, KPMG’s annual survey shows that the UK is still an attractive place to do business, despite falling in rankings in tax competitiveness and FDI appeal