50% Tax Rate Tarnishing UK Competitiveness
Friday September 09 2011 | 04:16 AM

A group of leading economists are the latest to place pressure on the UK Chancellor, George Osborne, to repeal the top individual income tax rate of 50%, warning of the 'lasting damage' the tax will cause to the UK economy if it is not revoked “at the earliest opportunity”.

In a letter first published by the Financial Times, the group of twenty high-profile economists have urged Osborne to “drop the 50p tax at the earliest opportunity as part of a package of measures to stimulate growth.” They argue that the tax is nonsensical as it is only serving to drive internationally-mobile individuals abroad to pay taxes in other countries with more competitive income tax regimes, such as Switzerland.

The letter says as a result of the 50% tax rate, which cuts in on earnings above GBP150,000, the UK is "less competitive internationally, and less attractive as a destination for both foreign investment and talented workers".

Osborne has tasked the UK tax authority, HM Revenue and Customs, to establish whether the 50p tax rate actually achieves the revenue forecasts used to justify its introduction by the previous Labour administration in 2010. Osborne has described the levy, which affects around 320,000 individuals in the UK, as temporary while the UK attempts to cut the budget deficit.

In a response on September 7 to the economists' letter, a spokesperson for the Treasury dismissed criticism of the tax, stating according to the BBC that: “The government is committed to a competitive tax system, but in reducing the deficit, we have always been clear that those with the broadest shoulders should carry the greatest burden.”