Will scrapping the 50 pence rate boost overall tax revenues?

Will scrapping the 50 pence rate boost overall tax revenues?

Could this be a difficult CON-LD issue?

There’s a report in the Telegraph this morning that could open up the divide on tax between the coalition partnets.

Under the heading “50p tax rate ‘failing to boost revenues” the paper reports that there was a £509m drop in tax paid by those paying by self-assessment last month with the suggestion that high earners have simply adjusted their affairs to get round the rate – first imposed towards the end of the Labour government.

Robert Winnett and James Kirkup write: “The self-assessment returns from January, when most income tax is paid by the better-off, have been eagerly awaited by the Treasury and government ministers as they provide the first evidence of the success, or failure, of the 50p rate. It is the first year following the introduction of the 50p rate which had been expected to boost tax revenues from self-assessment by more than £1 billion.

Although the official statistics do not disclose how much money was paid at the 50p rate of tax, the figures indicate that it is falling short of the money the levy was expected to raise.

A Treasury source said the relatively poor revenues from self-assessment returns was partly down to highly-paid individuals arranging their affairs to avoid paying the 50p rate.”

It was argued all along that this could be the consequence of making the tax increase for higher earners permanent. Now, apparently, there’s the data to back it up.

Politically this is difficult for all parties. The general line of clobbering the rich goes down well in the polling and it’s not so easy communicating the message that abolishing the top rate increases the tax take.


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