Higher income taxes risk driving businesses away, tax firm Baker Tilly warned today, reversing the gains made by cutting corporation taxes.
Tax partner George Bull fears George Osborne and Ed Miliband are both threatening Britain’s competitiveness by targeting high earners relentlessly.
Britain’s headline corporation tax has dived from 30 per cent a decade ago to 23 per cent last year, and will soon fall to 20 per cent.
That keeps the UK below the OECD’s average, even as other countries have chopped their taxes.
But at the same time the top rate of tax has risen to 45 per cent, child benefit has been withdrawn from high earners and almost 1m people now pay the 40p rate.
Bull fears this is shifting the burden of tax from businesses and onto business owners and executives – negating the attraction of low corporation tax rates.
“We should be concerned by this trend. David Cameron is keen to show international businesses the corporation tax rate is on a steady downward trend,” Bull said today.
“But in personal tax, there is an increasing polarisation, with the top five per cent of earners paying more than half of all income tax.”
“This is making the UK attractive to businesses but not to business owners and executives.”
When that is combined with Labour’s plan for a £6bn raid on bank bonuses and expensive property, it appears “the pressure to impose further tax rises on those who are already providing a disproportionate share of the tax take is far from over,” he said.