THE 50p top rate of income tax will hammer British growth and actually reduce government tax receipts, a Westminster think tank will say today.
“Evidence from overseas shows that high top tax rates fail to produce public revenues and injure economies,” the Adam Smith Institute (ASI) argues.
Labour mobility among high earners, relocation by businesses, lost economic activity and higher use of tax shelters were calculated to drag on growth and revenues due to more punitive taxes, according to the report.
“The introduction of the 50p tax rate, along with the 40 per cent higher tax rate band and high capital gains tax levels, has stifled our competitiveness and economic growth,” its report states.
And chancellor George Osborne should scrap the “revenue-losing” £30,000 non-domicile charge, the ASI is expected to demand, ahead of the budget this month.
Yesterday the tax system was attacked as “the longest and most complex in the world,” by the ICAEW group of accountants.
“It not only makes it harder for UK businesses to operate but undermines confidence in the UK as a place to invest,” said ICAEW’s Ian Strange.
However, the coalition government received a ringing endorsement of its “Plan A” for fiscal consolidation today, from City economist Dr Tim Morgan.
“The UK’s past fiscal profligacy is unaffordable and unsustainable,” said Morgan, author of a report released today by the Centre for Policy Studies.
“The UK cannot borrow its way out of a debt problem,” Morgan added.
“And the planned spending cuts are not ‘massive’ -- the reality is that they merely unwind a small part of the earlier profligacy,” he said.