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UK Has Passed a De-Stimulus: Tax Lawyer
By: CNBC.com | 01 May 2009 | 05:23 AM ET
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The UK government's decision to tax people earning more than £150,000 ($225,000) a year on 50 percent of their earnings is a de-facto stagnation package, Charlie Elphicke, tax partner at law firm Hunton and Williams, told CNBC Friday.

"It’s economics of the madhouse...the government has introduced a new tax that will raise no money, and that will stop the richest people who spend the most money, from spending money, in the middle of a recession”, Elphicke said. "So not only do we have a tax that raises no cash, we have a fiscal de-stimulus package issued by this government, purely for political purposes that is an absolutely lunatic thing to do.”

The new "tax will not raise any money and does not make any sense whatsoever”, despite the government’s argument that taxing the bracket of people earning more than £150,000 a year, will help the economy recover, he told "Squawk Box Europe."

While the UK government has taken tentative measures to stimulate the economy, such as cutting the value added tax (VAT) by 2.5% last year, Elphicke said he believes the government has gone down the wrong route.

“The way to bring in more money and to stimulate the economy is to reduce taxes over time," he said. "The way you tackle recessions traditionally, we saw that in the 90s recession and we’ve seen it in the VAT cut, although it didn’t happen very well, it was the wrong measure, which should have been the basic rate.”

"Just trying to whack the rich and make them leave the country or avoid tax is not the sensible thing or prudent thing to do," he added.

- Written by Lianna Brinded

© 2009 CNBC.com
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