WHAT do Sir Richard Branson, the CBI, and pop sensation of the moment Adele have in common?
They have all denounced the 50p income tax. Adele may have declared herself “Labour through and through”, but when Her Majesty’s Customs and Excise demanded she hand over half of the £16m she made from her last album, she said she wanted to get a gun and go on a shooting spree. A tax-and-spender mugged by reality?
It shows how the tension over the 50p tax is mounting, as the tax inspectors post their demands, and its effects turn from rhetoric to reality.
It has completed its first year of operation, and the mounting anger of the well-off is matched by the praise for it by the left wing commentariat, publicly applauding the money it appears to be raising (but secretly pleased it is squeezing the rich).
The chancellor has made clear his intention to abolish it in the long run, but the politics are going to get more intense. Labour’s tax unites against it an unusual coalition of business groups, pop stars, footballers and entrepreneurs, but scrapping a tax on the affluent is difficult politics for a Conservative chancellor in an age of austerity. But while the politics are difficult, the economics are easy.
The tax poses a major threat to our global competitiveness – and our economy. It gives us the fourth highest personal income tax regime in the EU, and far higher than any global competitor including the US or Australia.
Wealth managers told me last week that many of their clients were moving their assets overseas to avoid the tax, putting meat on the bones of the claims by the Institute for Fiscal Studies that it will cost the Treasury as much in tax avoidance as it will raise.
The trouble for the chancellor is that the money raised by the 50p tax will be highly visible, while the effect it has on inward investment, employment and tax avoidance more difficult to prove.
Much of the political appeal of the tax is based on myth rather than reality. It is seen as a tax on City bankers, but actually over 70 per cent of the people hit by it live outside the capital.
Many are small business people who as soon as they do well find the government taking more than half of what they make. It is seen as detrimental only to the rich, but its wider economic impact means even those below the threshold suffer.
In political terms, the 50p tax hasn’t really barked yet, but the yelping is getting louder. Just ask Adele.
Anthony Browne is a board member of theCityUK email@example.com