The report, introduced as a "temporary" measure by then-chancellor Alastair Darling in 2010, and entitled, The 50p tax – good intentions, bad outcomes, questions the 50% rate of tax, , on earnings over GBP150,000 per year. The report also looks to evaluate whether the tax raises tax revenue or if it is instead has a negative impact on the growth performance of the UK economy.
According to the report: "Whilst well-intentioned, advocates of 50p tax are likely to cost the Treasury a significant amount of money in lost income over the coming years."
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The survey was based on the statistical evidence available, survey data and existing academic literature. The survey also built on a 2009 Institute for Fiscal Studies briefing note that examined the impact of a 45% top rate of Income Tax.
The report concludes that the UK has lost its place as an attractive, low-tax jurisdiction that welcomes wealth creators and has instead become one of the most punitive.
According to the report, since 1997 the UK has dropped from fourth position to 95th in the World Economic Forum’s tax competitiveness ratings.
The UK has 270,000 wealthy individuals who contribute some GBP40 billion of income tax a year, 25% of the total of GBP163 billion the HMRC collects from income tax.
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By GlobalDataThe Cebr report suggests that a combination of higher VAT, higher national insurance contributions, and increased labour and capital mobility will push the UK’s wealth-creators to avail themselves of tax-minimising opportunities and move their wealth offshore, leaving a vital gap in the UK’s revenues.
The report states that there are a number of financial products that allow individuals to minimise their exposure to the 50% rate of income tax.
Commenting on the long-term loss in revenue that the government will experience as a result of the 50% rate income tax rate, Doug McWilliams, the founder and chief executive of Cebr, says; "In the long term this could have devastating consequences for Government revenue as more money is likely to be lost rather than gained by the higher-rate tax. Our projections show that the 50p tax is set to lose the Treasury more than a billion a year by the middle of the decade."
