Tax and Fiscal Policy

Time for action on the 50p rate


Monetary Policy

SMPC Chairman David B. Smith comments on the Bank of England's regulatory policy

The IEA calls for the 50p tax rate to be abolished

Commenting on calls today for the abolition of the 50p tax rate, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“The government needs to match its pro-business rhetoric with some real action on policy. When hundreds of entrepreneurs point out the folly of the 50p tax rate, the Chancellor must take notice. To retain the top rate, in the face of increasing evidence mounting against it, would be a triumph of political posturing over economic reality. George Osborne should spell out his plans to scrap the top rate in his budget later this month.”

Prof. Philip Booth, Editorial Director at the Institute of Economic Affairs, said:

“The 50p tax rate should be abolished immediately. Serious work suggests that it raises a trivial amount of money and the long-run effects may be such that no money is raised at all. The longer this measure stays in place, the less credible are the government’s assertions that this is a temporary tax and the harder it will be to keep entrepreneurial talent in Britain.

“The group that pays the 50p tax rate pays 28% of all income tax. It would be dangerous indeed to erode this tax base. Furthermore, after allowing for other taxes, such as indirect taxes and payroll taxes, those paying the 50p tax rate on earnings actually pay nearly two thirds of their income in tax at the margin. This is penal and should have no place in a free economy.”

Notes to editors

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The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.