Plans to slash the top rate of tax in the UK make it stand out as the global average top rate of tax has risen, new research suggests.
KPMG’s individual income tax and social security rate survey found the global average top personal income tax rate rose 0.3% last year.
This is only the third time over a decade that a global increase in top earner tax has been recognised globally.
"In large part, this upward tick in personal tax rates is the result of a lack of economic recovery and increasing debt concerns," said Brad Maxwell, a partner with KPMG’s international executive services (IES) practice in Switzerland.
UK going against the grain
The research suggests that UK government plans to cut tax for the wealthiest from 50% to 45% in April 2013 is out of step with global trends where tax levels are increasing.
Even before the rate reduction is taken into effect, the UK drops from 4th to 5th highest in the EU.
With new rates, the UK will be closer to the EU average which is just over 37% and, if weighted for the different size of populations in the various countries, is 42%, according to KPMG’s calculations.
Top rates a major issue
KPMG UK head of IES, Marc Burrows, commented: "The £50p rate was always described as temporary and so a firm commitment to its reduction was very welcome to businesses and entrepreneurs."
He added, "Being ‘open for business’ is not just about the corporate tax regime. Personal tax is a major issue for entrepreneurs, high net worth individuals and senior executives, many of whom can and do exercise considerable discretion over where they choose to locate."
France and Spain reformed
In the meantime, Spain jumped from 10th to 3rd highest by increasing its tax rate from 45% to 52% in January 2012. Under France’s new government, the country also saw the introduction of two new tax rates for high income earners. The top rate increased from 41% to 45% since 2012.
This will change further as François Hollande is also planning the implementation a 75% tax rate band for taxpayers earning over EUR1, 000,000.