THE DROP in the UK’s top personal tax rate from 50% to 45% was the highest seen globally, and saw it move from 5th highest in the EU to 11th, according to research by KPMG International.
During its three years of operation, the UK’s 50% rate was widely criticised for driving high-earning individuals abroad and acting as a deterrent to entrepreneurship.
The global average income tax rate increased again this year by 0.3% – the second year in a row. This year also marks the second-highest quantity of rate increases – nine countries – since KPMG began collecting rate data in 2003.
“Targeting high income earners is a way for governments to gain revenue and be seen by taxpayers as doing something that is fair and necessary for the betterment of their country,” said KPMG’s global head of international executive services René Philips.
KPMG’s UK head of international executive services, Marc Burrows, added dropping the top rate 5% “enhanced the UK’s attractiveness to internationally mobile executives”.
“In our view there is a point at which tax rates can squeeze taxpayers too hard and act as a disincentive to growth and investment. At 50%, the UK was probably at that point and lowering the rate thus removes this barrier to an extent although 45% is not the lowest rate around by any means”, he added.
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