Businesses call for 50p top tax rate to be scrapped

 

Charlie Mullins, Pimlico Plumbers founder, said the 50p tax rate was stopping firms from expanding and had seen the government lose £500m in the amount of tax collected.

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More than 500 business leaders have called for the 50p top rate of tax to be scrapped in next month's Budget.

In a letter to the Daily Telegraph, they said it was reducing government income and damaging the economy.

The entrepreneurs accused Chancellor George Osborne of putting "populist politics before sound economics".

Mr Osborne has said the 50p rate is a temporary measure and has asked officials to assess how much extra revenue it actually brings in.

There is speculation that wealthy tax payers find ways of avoiding it.

'Awkward position'

The letter, from the owners of 537 small and medium-sized businesses, said: "Given the current state of the UK economy, we urge the chancellor to urgently consider scrapping the top rate of tax in his forthcoming Budget.

"The tax, which is in effect a 58p tax after national insurance is taken into account, puts wealth creators like us in a very awkward position.

"We believe the richest should help the poorest in society. 1% of taxpayers are forecast to contribute nearly 24% of income taxes.

"But penalising high earners through an unfair, politically-motivated tax puts populist politics before sound economics."

The letter adds: "The result is that the 50p tax is set to reduce government income and damage the economy, the public services and charitable giving."

Tricky decision

One of the signatories, Tony Stein, director at Canterbury Care, said the rate was a disincentive to job creation.

He said: "Times are hard and reducing the resources available to entrepreneurs to reinvest in new business is the wrong outcome for the country."

Business leaders are funding a campaign against the tax rate of 50p in the pound.

Last September, the campaign organised a letter signed by a group of leading economists.

BBC chief economics correspondent Hugh Pym says the decision of when to end the 50p rate will be tricky.

Some people argue that when there is a public sector pay freeze it is wrong to be helping the richest in society.

'No timetable'

Shadow chief secretary to the Treasury, Rachel Reeves, said now was not the time to do away with the 50p rate.

"When millions of families and pensioners on middle and low incomes are being squeezed by the VAT rise and cuts to tax credits, cutting taxes only for the richest 1% cannot be the right priority now," she said.

"But these business owners are right to call on the government to take action to stimulate growth and jobs in our economy.

"That's why Labour is calling on the chancellor to use the almost £1bn unspent from his failed national insurance holiday to give a tax break to all small firms taking on extra workers."

The rate, introduced by Labour, is levied on earnings above £150,000 a year.

A Treasury spokesman said: "We have said we regard 50p as temporary and have asked HMRC to report on its effectiveness. We have not set out a timetable for any change in policy."

Sir Martin Sorrell, chief executive of the global advertising firm WPP, told BBC Radio 4's Today programme: "The government is trying to reduce the rate of increase in spending, or even cut spending, and in these circumstances it's understandable that taxes would be at higher levels than in more normal circumstances.

"Having said that, if you asked my personal view, I would like to see the tax rate lower."

 

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  • rate this
    -27

    Comment number 255.

    High tax rates are very harmful to the economy. The best talent and investment goes elsewhere and the government raises less revenue, not more. The lessons of the 60s and 70s have apparently been forgotten - when the top rate of tax comes down, the wealthy pay more tax.

  • rate this
    +6

    Comment number 254.

    "Why should paying tax stop people creating jobs"
    People create successful and profitable businesses - in part - so that they can enjoy the rewards. Thet are motivated by success and high earnings. Take away their money, and they will not create the business. So, fewer jobs.

  • rate this
    +1

    Comment number 253.

    229 Mr Max
    There is a lot of evidence that contractors set up a company and then the employer pays the company. In fact I have been offered this service myself and it would significantly reduce my income tax. You can also use a shell company in the Isle of Man and pay about 11% tax! All legal and morally dubious! Thats wealth management for you. And I don't even pay 50% tax.

  • rate this
    +11

    Comment number 252.

    Cut the tax for the lower paid and it will be spent within a few weeks and it will be back in the economy. These at the lower end struggle to make ends meet. If you cut my tax I will just buy more shares or unit trusts.Its not rocket science Osboune.I think we have got the wrong Osboune in number 11,I am sure Ozzy from Black Sabbath would do a better job.

  • rate this
    +6

    Comment number 251.

    How's this for an idea.
    Get rid of the 50p tax rate, and simultaneously crack down on tax evasion, close the avoidance loopholes, and enforce 100% collection.
    There's far more revenue lost though the holes in the bottom of the bucket than the 50p rate ever brings in at the top.
    And before anyone starts .... I earn well below the £26K net (£35k Gross) minimum living costs (re. benefits reform)

  • rate this
    +4

    Comment number 250.

    It would be more palatable if people on relatively modest salaries didn't his 40% so soon. Why not reduce the first tax bracket to 35%, stick 40% to 45% on £150k plus an then have a leftie pleasing 55% on say £1mn plus? Lefties would be pleased to punish success and the middle income earner would be happy. (I get nothing for my tax schools, healthcare, roads, even bin collections are all awful).

  • rate this
    +3

    Comment number 249.

    "Currently the top 2.4m households own assets worth about £1,300bn, while the bottom 12m households own assets of £150m."

    The top 10% take 45% of the income yet the bottom 50% (some 22m people) are left with just 12% of the income. Inequalities are worsening and have been since the 80s. It cannot be allowed to continue this way or there will be riots, looting, general anarchy. Just wait.

  • rate this
    -2

    Comment number 248.

    Lewis Fitzroy. I spend 50% of my rental income from my properties on repairs, maintenance, Christmas gifts for tenants etc. I then pay 20 - 40% on what's left in tax. I'd be no worse off selling the lot and putting the money in a building society (and give a banker an excuse for a bigger bonus!). Do you advise me to do that, or provide decent homes for people who need them?

  • rate this
    +7

    Comment number 247.

    We're all in this together, are we?! Don't make me laugh!

  • Comment number 246.

    All this user's posts have been removed.Why?

  • rate this
    +7

    Comment number 245.

    Ken Livingston (£200k+ earned last year) among other good socialists has allegedly shown how to do it. Just create a company (you own the shares) and put your 'earnings' into it. Pay yourself a low salary (to avoid high rate tax and NI) but high share dividends (lower tax rates). Claim expenses for everything (tax free). Pay lower rate corporation tax on the company profits. 50% tax? No thanks.

  • rate this
    +5

    Comment number 244.

    I'd suppory axing the 50p rate provided at the same time duty on fuel was also permanently reduced by 10p. Pay for it by scrapping child tax credit and child benefits for everything past the 2nd child.

  • rate this
    +7

    Comment number 243.

    My understanding is that it is revenue negative, it costs more to collect than that which is collected.

    If this is true, it is nothing more than a Lib-Dem classic punish the rich policy, it is stupid and needs abolishing.

    If it generates decent revenue I have no issue with it.

  • rate this
    +2

    Comment number 242.

    Why does no one mention that the rate is 60% on earnings from £100k to approx £116k due to the removal of £1 of personal allowance for every £2 earned over £100k.

  • rate this
    +1

    Comment number 241.

    Why are people who work hard, make a lot of money and pay a lot of tax to support scroungers with no intention of working, always described as " privileged " ? Maybe it's because they are too busy working to watch Jeremy Kyle and his "guests " instead of working for a living.

  • rate this
    +7

    Comment number 240.

    #119. Rebecca Riot. To me the Clegg/Cameron Coalition is already socialist, no input is required from France. But I will say that all the well off on £150000, moaning about struggling to get by, clearly cannot manage their own affairs, let any one else's, which begs the question: How do they rate such high salaries from whomever employs them?

  • rate this
    -1

    Comment number 239.

    181.Boro Jonesy
    you are a troll; right?
    you don't actually think the world works that way do you?

    209.teeps
    i didn't know we were living in anarchy / feudalism but ty for pointing out something i apparently over look every day i move around this country

    207.ichabod
    according to statistics; everything you're saying is void.

    211.Lol
    way to generalise; you're on a roll now!

  • rate this
    +17

    Comment number 238.

    I'm far from wealthy but I'll only support a tax system that is utterly fair, everyone pays the same rate above the tax free allowance. If the rate's supposed to be 20% then someone on £100k will pay ~£20k in tax. where someone on £10k pays £400 (assuming a tax-free of £8000). I know it's nice to penalise the rich and successful but it isn't fair so those affected will easily find tax dodges.

  • rate this
    +1

    Comment number 237.

    "218.Viewer1948

    In 1974 the top rate of income tax was 84%. The present 50% is a gift. Why are they complaining? They are not on the breadline."

    Also, in 1974, captains of industry didn't have their huge pay cheques - the BBC stated that at that time the chairman of Shell only earned around £29,000, about 20 times a manual workers wage.

  • rate this
    +2

    Comment number 236.

    184.Konran

    Bearing in mind that we already pay for public services through the smaller tax brackets, why would there be inadequate?. Also consider that most of the higher brackets don't use the NHS as they all have private health, don't use much public transport,have private education for children the high earners pay a lot more in that they take out.
    But don't let Jealousy spoil your rant.

 

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