Britain’s New 50% Top Tax Is Failing to Boost Revenue

The UK Telegraph reports:

The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.

Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.

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 £1billion.

I’m not a believer in the Laffer Curve, the idea that higher tax rates produce less revenue. I concede that it might occur at extremely high rates like 70%. However, I think it’s perfectly reasonable to see a short-term effect and I’d guess that’s probably what we’re seeing in Britain.

People respond to incentives. The rest is details.

Posted by on February 22nd, 2012 at 12:08 pm


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