50p rate is inefficient, claims CEBR

THE 50p TAX rate is losing revenue for the Exchequer, an economic think-tank has claimed.

A new report from the Centre for Economics and Business Studies (CEBR) said the optimal rate of tax for generating income has decreased in the past year. It claimed that the most efficient rate is now below 40%.

The CEBR put this down to greater flexibility in the jobs market and increases in VAT and National Insurance. When these increases are taken into account, the effective marginal rate of tax is 65%, it claimed, higher than the Institute for Fiscal Studies’ estimate of 57%.

The report said: “Previous estimates of the taxable income elasticity were based on the assumption that British wealth creators were strongly rooted in the British Isles and felt a moral obligation towards the British tax system.”

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