Britain leads Europe in cutting top rate of tax

THE UK has cut the top rate of income tax by more than any other country in Europe, according to analysis from KPMG out yesterday.

And the fall in the top rate from 50 per cent to 45 per cent means Britain has leapfrogged half a dozen other countries to move from the fifth highest rate in Europe to the eleventh. It now shares the same top rate as Germany and France – still well above the US top rate of 39.6 per cent and the EU average of 37.9 per cent.

The change came in the new financial year in April, and marks a stark contrast to the tax hikes in other neighbouring countries.

Slovenia brought in the biggest rise, hiking its top rate by nine percentage points, from 41 per cent to 50 per cent. It moved up from 16th in the European league table to sixth.

The Czech Republic was next with a jump of seven percentage points to 22 per cent, moving from 26th highest to 22nd. And Luxembourg’s rise of 2.26 percentage points pushes its top rate up to 43.6 per cent.

Meanwhile a pair of other countries cut rates. Greece’s top rate dipped from 45 per cent to 42 per cent, seeing the troubled country improve from 11th highest to 16th highest.

And Latvia’s dipped one percentage point to 24 per cent, maintaining its position as the 21st most highly taxed.

KPMG said Britain’s tax cuts are making the country more competitive.

“Dropping the UK’s top rate from 50 per cent to 45 per cent enhanced the UK’s attractiveness to internationally mobile executives,” said KPMG’s Marc Burrows. “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 per cent, the UK was probably at that point and lowering the rate thus removes this barrier to an extent although 45 per cent is not the lowest rate around.”

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