By Maximilian Clarke

A Thames Valley accountancy firm, James Cowper, has today called upon the Government to axe the 50% income tax rate arguing that it is causing long term damage to the country’s competitiveness.

The call follows the announcement last weekend that drinks manufacturer Diageo is no longer creating senior jobs in the UK and that some 800,000 expats have decided to delay their return to the UK because of the higher rate of income tax.

“The 50% income tax rate was introduced as a temporary measure, yet it is still here and with no sign of it being dropped," said Steve Clarke, managing partner, James Cowper. "The longer it remains the more damage it will do to the country’s international standing and to businesses here in the UK.

“The decision to keep this higher rate of income tax is purely political. Very few people would argue against higher earners paying more tax but in the interests of the country as a whole tax rates should be set to maximize the total tax take. There is also absolutely no evidence that this increased rate is generating significantly higher tax revenues; all suggestions point to it actually costing the country money. We seem to be cutting off our economic noses to spite our political face.”

The higher rate of tax is forecast to raise £3.1bn in 2011/12, falling to £2.7bn in 2012/13. The Adam Smith Institute however estimates that maintaining the 50 per cent rate would cost the country some £350bn over the next decade. “The figures speak for themselves. That’s an expensive political gesture”, continued Clarke.

The marketplace for large multi-national corporations is competitive. Just last month Twitter decided to locate its European headquarters in Ireland, rather than the UK, followed by other technology giants including Facebook, Google, Yahoo and Ebay.

Clarke added: “The decision to choose another location, such as Ireland, is not entirely down to the higher rate of income tax — lower corporate tax rates play a big part. But the higher rate of income tax will almost certainly play a part in the decision making.

“Chancellor George Osborne has the perfect opportunity in his autumn statement (29 November) to show leadership and announce the end of the temporary 50 per cent rate as part of his measures to reignite the economy. The longer this rate stays the more damage it will do to the UK’s economy and international standing.”


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