Accountants hit out at Clegg’s tycoon tax

Julian Harris
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INDEPENDENT accountants have shot down deputy prime minister Nick Clegg’s call for a “tycoon tax”.

Addressing his party faithful at their spring conference in Gateshead, Clegg attacked “multimillionaires avoiding tax by moving their money around” and claimed that many pay less than 30 per cent or even 20 per cent tax.

Yet tax experts at the UK’s big four accountants doubt his claims. “I know one reads headlines saying that people aren’t paying the full amount of tax, but it’s actually quite difficult to hide tax – and high earners are paying a high rate,” said Alex Henderson of PwC.

People earning over £1m pay 45.5 per cent tax on average, HMRC stats show. “A lot of people are actually paying 50 per cent or more,” added KPMG’s David Kilshaw, “and HMRC police it very well.”

“The sort of person who would be really badly hit [by this proposal] would be someone on £60,000 who pays a £20,000 pension contribution,” added Henderson. “And they are a long way away from being a tycoon.”

Clegg plans to emulate the US alternative minimum tax, designed to prevent the wealthy from using exemptions to slash their income tax below a certain level.

But such deductions are “nowhere near as prevalent” in the UK, said Patrick Stevens of Ernst & Young. “To that extent [Clegg’s proposal] is an answer looking for a problem.”

A Lib Dem spokesperson told City A.M.: “The Treasury are looking at whether it’s appropriate. It would have to fit the tax model here.”