THE government has “significantly reduced” the level of revenue it expects to generate from the new 50p income tax band, City minister Lord Myners admitted yesterday.
In a tacit recognition that high earners will find ways to evade the higher rate of tax, Lord Myners said he was doubtful the Treasury would haul in the £1.1bn estimated for 2010 or the £2.5bn earmarked for 2011.
“We have made adjustments for the behavioural consequences of the new higher rate of taxation and have accordingly significantly reduced the anticipated tax take,” he said during a Parliamentary debate. “But we still believe it will be beneficial.”
The City minister’s comments confirm warnings by the Institute for Fiscal Studies and accountants that the government’s calculations of the amount an increased levy on people earning more than £150,000 will yield are inaccurate.
Financial advisers say many of the two per cent of the population falling into the category will find ways to dodge the 50 per cent rate – either by pumping up this year’s pay, storing up part of next year’s salary in a company account or leaving the country.
Lord Myners said Labour’s commitment to the 50p rate was not “ideological”. It would be lowered as soon as economically possible, he added.