Top rate tax is bad for UK, says IoD

Date: 8th April 2010

The introduction of the 50p tax rate will raise little or no tax overall for the UK, it has been claimed.

According to the Institute of Directors (IoD), the tax, which came into effect this week, is likely to encourage a number of high-earning workers to relocate to "more competitive" tax jurisdictions.

The organisation also claimed that multinational companies could move their UK operations abroad in order to avoid high levels of corporate tax.

As confirmed by Alistair Darling in last month's Budget announcement, people earning more than £150,000 per year are now subject to the 50 per cent income tax rate.

High earners have also had their tax free earning allowance removed by the chancellor.

Richard Baron, head of taxation at the IoD, said: "The superficial attraction of 50p rate is that it will yield some new revenue from higher earners which can be used to tackle the fiscal deficit.

"But once we dig deeper, we can see the policy is foolish. It will not help the people one would expect on lower incomes, but will create a further deterrent to new international capital coming to the UK, thereby impoverishing all of us indirectly over time."