50% Tax Rate Meets Growing Opposition in UK
The 50 percent tax rate paid by the UK’s highest earners has come under renewed attack by business groups as Chancellor of the Exchequer George Osborne prepares for the nation’s budget later in March.
Pressure is building on Osborne, who will announce his plans for next year’s UK tax system on March 21, to scrap the tax.
A group of small to medium-sized business owners claimed the tax on income earned over £150,000 ($236,000) was “unfair,” “politically motivated” and “puts populist politics before sound economics,” in a letter published on Friday in the Daily Telegraph, the right-wing British broadsheet.
The Chancellor is already examining whether the tax, brought in just two years ago by the Labour government, brings enough into the Treasury to justify the potential downsides if it leads to high earners leaving the country.
The Confederation of British Industry has also advised the Chancellor in the past to scrap the tax – although a spokesman for the organization told CNBC.com that the business group is not actively campaigning on it ahead of the current budget. And leading economists have also urged him to get rid of it.
The tax means that 58 pence on every pound earned over £150,000 is taken by tax and national insurance payments. It was introduced by the previous British government following the credit crisis and a backlash against perceived excess risk in London’s banking system.
“This government is trying to get things done. The overall attempt to reduce the size of government and reign in deficits through austerity has been good. The program is not perfect,” David Roche, global strategist, Independent Strategy, told CNBC.
Higher earners are under the spotlight in Europe at the moment. The bank earnings season was dominated by the debate over bankers’ bonuses – and French Presidential candidate Francois Hollande has vowed to tax those who earn more than 1 million euros ($1.32 million) at a rate of 75 percent.