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The UK is leading a European upward-trend in personal tax rates, claim the results of a new study.
Last year's introduction by the Labour government of a 50% income tax band was the highest growth seen globally, propelling the country to equal-fourth position in the 2010 league table of EU personal tax rates, according to KPMG's latest survey of individual income tax and social security rates.
This is a significant rise from the UK’s 13th placing last year. The country now sits alongside Austria and Belgium. The study – which shows that the majority of worldwide movement in 2010 comes from the EU, where average rates went up by 0.3% over the past year – suggests the rest of Europe is following the UK in instigating higher levels of income tax.
‘Only Sweden [56.6%], Denmark [55.4%] and the Netherlands [52%] outstrip the UK in terms of personal income tax rates, and we are higher than key competitors, France and Germany, said KMPG tax partner Jayne Vaughan. ‘Although, it is worth noting that the UK’s top rate of tax kicks in at a much higher earnings level than is the case in most of these countries.
‘This makes a difference to our competitiveness because individuals are highly mobile and they may decide to vote with their feet. And where employers are concerned, tax is a crucial business issue when it comes to deciding where to locate workforces,’ added Ms Vaughan.
'Whether the tax rate increases we have seen around the world strike the right balance and have the intended impact has yet to be seen. Everyone may have a role to play in supporting their national deficit reduction measures but the fact that high-income earners are frequently more mobile should not be overlooked.
'Attracting such individuals… [by] using a competitive personal tax rate market, while tackling budget deficits, remains the challenge.’
