50p tax will harm entrepreneurs, jobs and the economy

Monday, 02 November 2009 08:28

Written by David Parsley

50p It feels like we’re in the 1970s again. Public sector strikes, warnings from the IMF that Britain must cut debt and pundits calling the end of Labour’s grip on power.

But, for many entrepreneurs there’s one issue that takes us back to an era of punk rock and avocado bathroom suites more than any. The prospect of a 50p tax hike for those earning more than £150,000 has raised that constant of the 1970s – an imminent exodus of leading talent to more favourable tax regimes abroad has been threatened ever since Chancellor Alistair Darling announced the policy in April.

Premiership footballers are quaking in their studded boots at the thought of handing over more of their millions to HM Revenue and Customs. Celebrities such as Michael Caine and scruffy bedroom artist Tracey Emin have voiced their displeasure and the financial world has labelled the move “unfair, complex, inefficient and damaging”.

However, will this threatened exodus actually materialise if the 50p rate does come into force?

Arguing the case against the new tax band are a string of City institutions and economic think tanks. Take the CBI for example. Its president, Martin Broughton, claims the 50p rate had been introduced to divert attention from the government’s “failure” to control its ballooning budget deficit.

Instead of attacking the wealthy, Broughton suggests that if business were responsible for the deficit it would reform public sector pensions, tackle the “mismanagement” of services and discontinue non-core activities.

Broughton says: “In the government’s position, we would start educating the public to accept that it is not the government’s role to address every issue in society. How many of the 1,000 quangos costing £65bn a year do we really need?”

But, perhaps the most damning comments on the new rate come from the Centre for Policy Studies. It argues the tax, which will raise just £2.4bn of new revenue according to Treasury figures, is “nugatory in comparison with current government borrowing requirements of £175bn.”

Its report on the hike says wealthy workers will shun Britain, which will have the highest tax regimes of any member of the G8 richest nations. The report also shows that the richest one per cent of people in Britain already provide 23.9 per cent of all income tax revenues, an increase on the 21.3 per cent at the beginning of the millennium.

Therefore, rather than raking in an extra £2.4bn, the Treasury could actually lose money. However extraordinary that sounds, it is also the firm belief of the bean counters at the Centre for Economic and Business Research (CEBR).

The CEBR claims the government will lose £800m million a year and tens of thousands of jobs will be lost if the 50p bracket is pushed through. Its findings claim 25,000 wealthy tax payers will depart these shores, taking with them up to 140,000 jobs and a fall in GDP in the City of London of three per cent.

But will it really happen? Will the wealthy escape high-tax Britain in their tens of thousands? Will entrepreneurs be dissuaded from building a business and their fortune on these shores?

Well, if the example of the 1970s is anything to go by, then no. Many threatened to shoot off to more tax friendly as well as sunnier climes, but not so many actually did. But things have moved on since the 1970s. Could the mass exodus really take place in this new age of mobile technology and labour?

Well, just compare the 1970s to now. Back then you could not jump on a cheap flight to just about anywhere in Europe, and once there hook up to the internet and run your business as easily, more efficiently and less expensively than on British shores.

What’s more, there’s nothing stopping you trading from a friendlier tax environment while maintaining a London presence. The same technology that allows me to write this article from a country retreat in Devon will allow those threatening to escape a harsher British tax system to do just that.

For me, the threat this time round is a genuine one. The only hope is that the expected Conservative government dumps the 50p tax hike. But, while David Cameron has hinted at such a move he has not guaranteed it. Without such a guarantee entrepreneurs, jobs and the entire British economy will suffer.

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Comments (1)

50% tax bracket!......lets talk about what it will really cost to get back on our feet!...more like 65% as a minimum will suffice!

The top earners of this country are not of British origin. The Likes of Laxmi Mittal will simply relocate their interest.

The problem with the The British, European and American 'Joe Public' or entrenpreneur is that they have been spoon fed for centuaries! This spoon feeding begins with the cornerstone that western economies depend upon ; and thats artificial growth through inflationary policies...I call it window dressing! Westerners have an inbuilt belief that they are the best and deserve the best.. period, and having been the best perceived places in the world to reside, have done little to demonstrate why their countries, their people should remain the best.

One the whole, internet technology availability to the masses may well go down in history as the single most important trigger to have eventually led to the down fall of western economies.

What is more true than ever, is that western economic and social policies are now unable to lead with a thump! Western policy makers are now having to reluctantly enslave their populations to the national debt.....its either enslave your populations or default of the national debt.....I am convinced that we will default, so will the Americans......as China is in a rush to build infrastructure rather than continue to fund American and European debt.....China and India are waiting patiently in the wings for a western economic collapse!...it is my belief that the US Government no longer cares for the US DOLLAR....it is my belief that the US Government secretly wants the US DOLLAR to weaken and eventually collapse....its easier to accept and bite the bullet and say...ok world...we're in trouble and we have to go bankrupt....draw a line under this and start again...reason being is because the western economic policy has gone full circle and there is no more momentum to propell us out of the gutter! Now...this collapse will be orderly....the world cannot not afford a world war....

So what can we Brits do about this? Our problems cannot be addressed by adjusting our political orientation or favouritism....our problems are more to do with attitude....yes the attitude that we think that we are some kind of superior entity that deserves the best.

Will people leave the UK because of tax hikes?...YES and NO....the wealthy that have more to lose will be gone in a blink.....the poor will not have the means to up root....this is what is wrong with our soceity....There is lots of pain to come....we ain't seen nothing yet!!!

Everybody thinks that growth and positive GDP is a sign of things getting better....what use is GDP printing positive if firstly the numbers are derived as a result of government stimulus, and secondly, people further down the wealth ladder don't actually see a direct positive impact?....Nothings changed, save the rich....drown the poor!!!...

We need a new edcuation programme in the UK....the old one has stopped working!...The end!

seanys , November 05, 2009

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