FT: Warning of City exodus over 50p tax rate

Warning of City exodus over 50p tax rate By George Parker and Brooke Masters

Financial Times Published: April 23 2009 22:07

Alistair Darling was warned on Thursday his new 50p income tax rate would drive talent from the City and discourage entrepreneurs, but early polls suggest that the chancellor?s Budget tax rises have tapped into rising popular hostility towards the rich.

Mr Darling?s tax raid on higher earners was widely criticised in the press as a populist gesture to divert attention from spiralling government borrowing and a political tactic to wrongfoot the Conservatives.

It brought protest from the City, which claimed that it was more evidence that the government saw bankers and wealthy people as sources of revenue.

Boris Johnson, London?s Conservative mayor, broke ranks with David Cameron, his party leader, in demanding that an incoming Tory government must abolish the 50p top rate, which would apply to earnings over £150,000 from next April. He said that it would penalise the City.

The 50p rate has a strong symbolic impact because it comes on top of last year levy of a £30,000 tax on ?non-doms? (foreign nationals working in the UK), new, tighter regulations on banking bonuses, and a cut on pension tax relief for top incomes.

?There?s a definite sensation of ?what?s next?? The message is th at high earners are not welcome here,? said Anna Chapman, a director of Ernst & Young?s private client services team.

The head of one City institution with a strong private client business fumed, ?What are they trying to do, drive all the high-earners out of London??

The marginal tax increase is unlikely to send people packing immediately. It does not kick in until April and will not be much higher than competing centres. But as the world economy recovers, companies and people may decide to move where opportunities and rewards are greater.

A combination of government measures targeted at people earning above £100,000 aims to raise more than £7bn, but tax experts dispute that figure.

Labour strategists think that the 50p rate will sharpen dividing lines with the Tories, who were careful to say that they would not immediately scrap the plan, and will play well with voters.

That view was supported in a Populus poll in Friday?s Times, which says that the 50p rate is backed by a majority of voters.

Nevertheless, ministers know that they are taking a big political gamble in throwing out New Labour orthodoxy, which stated that higher top rate taxes would send out a negative message about Britain?s approach to wealth creation.

Mr Darling acknowledged that dilemma, saying that the new top rate would only be in place ?while we resolve this situation?. Since he does not expect to balance the state?s books until 2018, that could be some time.

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kuacou241
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Financial Times Published: April 23 2009 22:07

Alistair Darling was warned on Thursday his new 50p income tax rate would drive talent from the City and discourage entrepreneurs, but early polls suggest that the chancellors Budget tax rises have tapped into rising popular hostility towards the rich.

Mr Darlings tax raid on higher earners was widely criticised in the press as a populist gesture to divert attention from spiralling government borrowing and a political tactic to wrongfoot the Conservatives.

It brought protest from the City, which claimed that it was more evidence that the government saw bankers and wealthy people as sources of revenue.

Boris Johnson, Londons Conservative mayor, broke ranks with David Cameron, his party leader, in demanding that an incoming Tory government must abolish the 50p top rate, which would apply to earnings over 150,000 from next April. He said that it would penalise the City.

The 50p rate has a strong symbolic impact because it comes on top of last year levy of a 30,000 tax on non-doms (foreign nationals working in the UK), new, tighter regulations on banking bonuses, and a cut on pension tax relief for top incomes.

Theres a definite sensation of whats next? The message is that high earners are not welcome here, said Anna Chapman, a director of Ernst & Youngs private client services team.

The head of one City institution with a strong private client business fumed, What are they trying to do, drive all the high-earners out of London?

The marginal tax increase is unlikely to send people packing immediately. It does not kick in until April and will not be much higher than competing centres. But as the world economy recovers, companies and people may decide to move where opportunities and rewards are greater.

A combination of government measures targeted at people earning above

100,000 aims to raise more than 7bn, but tax experts dispute that figure.

Labour strategists think that the 50p rate will sharpen dividing lines with the Tories, who were careful to say that they would not immediately scrap the plan, and will play well with voters.

That view was supported in a Populus poll in Fridays Times, which says that the 50p rate is backed by a majority of voters.

Nevertheless, ministers know that they are taking a big political gamble in throwing out New Labour orthodoxy, which stated that higher top rate taxes would send out a negative message about Britains approach to wealth creation.

Mr Darling acknowledged that dilemma, saying that the new top rate would only be in place while we resolve this situation. Since he does not expect to balance the states books until 2018, that could be some time.

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Sorry if this post sounds a bit 'typical' but... It was the high earners in the banking sector that got us into this debt mess... I heard one report of "it will drive all the banking experts out of the country" ..well sorry to say this but GOOD BYE and go and knacker some other countrys ecomomy And god am I sick of the phrase 'its a global thing'

Reply to
billybob

and those earning that sort of money will have good accountants to juggle the figures.......

Reply to
Tom E

Given that the tax is to be charged on "total" income and not just earned income, how are they going to manage that?

tim

Reply to
tim.....

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