Abolish 50p band, urges policy think-tank

Plans for a new top tax band for high-earners should be abandoned, according to the Centre for Policy Studies (CPS).

In a new report, the Conservative think-tank claims that the recently announced 50p rate, intended to take effect from April 2010, will be ‘unfair, complex, uncertain, inefficient and damaging’.

The mooted income tax rate ‘meets none of [economics pioneer] Adam Smith's criteria for good taxation - fairness, simplicity, certainty and efficiency – and will undermine UK competitiveness at a crucial time’, claims the CPS’s 12-page document, What’s Wrong with 50p?

It claims that ‘as a consequence of the Finance Bill 2009, there will be 16 different personal tax rates’ and ‘the withdrawal of some personal allowances will lead to widely variable marginal rates, reaching 61.5% for those earning between £100,000 and £112,000’.

The CPS’s main criticism of a 50% rate is that it is unlikely to raise amounts significant enough to revive the national economy: ‘…the estimated revenue of £2.4 billion is nugatory in comparison with current government borrowing requirements of £175 billion’.

The think-tank’s report claims that the proposed new tax band will ‘result in uncertainty about future taxation’ and ‘be the highest in the G8, and will therefore put the UK at the bottom of the international competitiveness league for high earners’.

The CPS paper adds: ‘The richest and most mobile members of the British population will have the greatest incentives to move abroad. The negative impact of the 50p rate will thus far outweigh its ability to reduce the national debt.

‘Moreover, it threatens the UK’s ability to rebuild enterprise and restore its battered economy. It should therefore be abolished.’

Categories: News , Income Tax