By Marcus Leach
Despite growing concern Deputy Prime Minister Nick Clegg has backed the continuation of the top rate of income tax at 50 pence.
According to Mr Clegg the coalition government's focus is on helping people on low and middle incomes, and should not be aimed at helping the 'small minority at the very top'.
However, George Osbourne has raised concerns over the high-end tax rate, highlighting the fact the country's top earners can move abroad to avoid paying it as a major downfall.
The chancellor has ordered a review of how much money the tax is generating, to be conducted by the Inland Revenue. However, there are those who fear the review may mean the phasing out of the tax by 2013.
According to Mr Clegg the 50p tax rate would remain in place given the government's priorities concerning tax lay elsewhere.
"The coalition agreement is clear that what takes precedence, if you have got money and the ability to provide tax relief to people, is tax cuts for million of people on middle and low incomes," he said.
"When living costs are high, when people are really feeling the strain, of course it is right to prioritise help, where you can give help, to the millions of people who need that help the most and not prioritise help to a very, very small minority of people who don't need as much help - in other words, the people at the very top."
The move to maintain the 50p tax rate was welcomed by Dave Prentis, UNISON General Secretary.
“The Government should abandon all talk of cutting the 50% tax rate and concentrate instead on closing the gap between those at the top and the bottom," he said.
However, Jonathan Russell, partner at ReesRussell, believes the lowering of the top-end tax rate would actually help generate more income from tax.
“Taxes are the income stream of Governments and basic commercial advice is, if something is not bringing in a profit and it cannot be made to do so, there is no point in continuing," he explained.
“The odd thing about taxes is that there is a psychological point where people are 'happy' to pay it and one where they will do everything in the power not to do so. This can often mean that decreasing a tax rate can often actually generate more income because the cost of collection goes down.
“Therefore, in business and economic terms, if the 50% tax rate is not covering its costs then it should be scrapped but politically that's a totally different question!"
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