Economists urge Britain to scrap 50% tax rate

7th September 2011, Comments 0 comments

A group of leading economists called on the British government on Wednesday to scrap the 50-percent top rate of income tax to boost economic growth.

In a letter to the Financial Times newspaper, 20 experts including two former members of the Bank of England's monetary policy committee, said they were concerned it was "doing lasting damage to the UK economy".

The tax, levied on incomes over £150,000 (170,000 euros, $240,000) was introduced in April 2010 as a temporary measure by the former Labour government but has been continued by Prime Minister David Cameron's Conservative-Liberal Democrat coalition.

The letter argues that Britain has one of the highest personal tax regimes in the industrialised world, which made it less competitive internationally and a less attractive destination for foreign investment and workers.

The economists said the top rate applied to only one percent of taxpayers who were already paying 24 percent of all income taxes.

"We call on the government to drop the 50p tax at the earliest opportunity as part of a package of measures to stimulate growth," the letter says.

"Only by returning to an internationally competitive tax regime will Britain enjoy long-term sustainable economic growth."

Signatories include DeAnne Julius and Sushil Wadhwani, former members of the Bank's monetary policy committee, and Bob Rowthorn, emeritus professor of economics at the University of Cambridge.

Finance minister George Osborne said last month that he has asked the Inland Revenue tax department to check whether the top rate was making money, amid criticism that tax avoidance and evasion was rendering it useless.

"There's not much point in having taxes that are very economically inefficient," he told the BBC at the time.

Osborne admitted on Tuesday that the government would have to downgrade its growth figures, but insisted that he would stick to his austerity plan.

© 2011 AFP

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