A leading think tank has praised the low tax regimes of places such as Hong Kong, Dubai, Jersey and the Cayman Islands, and at the same time slammed the UK 50 percent rate.
The Centre for Economics and Business Research has written a report looking at the current UK tax regime, and its impact on the nation’s business. The 50 percent ‘top rate’ was introduced in 2010 for Britain’s highest earners, a move that was labelled as a “temporary measure”.
However, the 50 percent rate still exists today and CERB feel it may be having an adverse effect on the UK economy. The main problem CERB feels the top rate is creating is that the “modern generation of wealth creators” meaning business leaders and young professionals are finding legitimate ways of escaping the tax.
The report says: “To the modern wealth creator, income tax is effectively voluntary... An increasing number of wealth creators can now enjoy a degree of 'financial emigration' whereby they employ perfectly legal and pragmatic approaches to modern tax management to channel their wealth out of domestic high-rate income tax and into lower tax categories and legal overseas arrangements, whilst never leaving home.”
The report adds: “There is a danger that the 50p tax pushes Britain over an important psychological 'threshold' that breaks any sense of a 'social covenant' these important taxpayers feel towards their domestic tax regime.”
In the last 15 years Britain has seen a remarkable slide down the tax scale. In 1997 Britain was classed as the fourth most competitive tax regime in the world, but now it lays in 95th place. The report then goes on to cite the regimes of Hong Kong, Dubai, jersey and the Cayman Islands as tax systems to emulate.