The Case for Competitive Personal Tax
"The Government says the 50% top rate of income tax is a temporary measure to meet the current economic pressures. Whilst the political tensions regarding the removal of this rate are understood, retaining this rate threatens the UK's long-term competitiveness. To address this threat it is vital that Government makes a clear and early commitment to removing the 50% tax by the end of the current parliament."
Baroness Jo Valentine
Chief Executive
London First
Taxation
London’s competitiveness has come under increasing pressure in recent years through a combination of adverse UK tax policies and positive moves by other countries to attract international business. While London is not facing a mass exodus of companies, many companies are seriously considering alternative jurisdictions when deciding where to locate new businesses and people. If new activities do not come to London then, over time, London’s key attribute of being a global talent hub will come under threat.
Rebuilding an attractive tax system at a time of unprecedented budget deficits and economic uncertainty is a major challenge.
Our June 2010 report, A Balanced Tax Policy: Supporting UK Growth, sets out why we need a tax system built on fairness, due process and competitiveness. We call on government to avoid knee-jerk tax rises which put the UK’s reputation at risk. A tax system which is competitive in terms of corporate and personal tax will ensure that the most talented individuals are attracted to London, whilst a sustainable and predictable approach to developing and implementing tax policy will restore confidence in the UK as a place to do business.
Response to the Treasury Select Committee's inquiry into the fundamental principles of tax policy
50% income tax rate
While the government has committed to the UK having the most competitive corporate tax regime in the G20, there has not been a similar commitment in respect to personal tax.
The 50% top rate makes it less attractive for high earners to locate in the UK. Given the concentration of highly skilled workers in London, an uncompetitive personal tax regime could threaten its position as a global talent hub.
London First is campaigning for the Treasury to review the top rate of personal tax to determine the rate which will generate the maximum revenue for the Exchequer (as occurred with Capital Gains Tax). We believe such a rate will be nearer 40% (based on IFS evidence) and are calling for a return to this rate over the life of the current parliament.
More generally, London First is calling for the government to make a commitment to an internationally competitive personal tax regime, similar to the commitment made in respect to the corporate tax regime. Read more in our briefing paper The Case for a Competitive Personal Tax Regime.
Please contact Jane Archer for further information.
