When are we going to lose the 50p tax rate?

The PM has declared war on the 'enemies of enterprise'. But as HSBC reportedly considers a relocation, shouldn't he start by scrapping punitive tax rates for top earners?

by James Taylor
Last Updated: 19 Aug 2013
The Government may have been banging the enterprise drum this weekend, but the CBI reckons the first thing it should so is set a timeframe for getting rid of the 50p tax rate for top earners. D-G John Cridland insists that 'mobile talent needs a good reason to do business in the UK', so the chancellor should 'signal a road map' (politician-speak for 'make a plan') for its abolition. And it's got a point: will higher earners keep working and setting up businesses in the UK if the Treasury keeps pocketing half their earnings?

As part of his argument for an 'all-action Budget which boosts exports, investment and jobs', Cridland said that businesspeople he'd been speaking to up and down the country were all unhappy about the 50p tax rate introduced by the previous Government (who'd have thought it?). And although George Osborne has talked vaguely about scrapping it at some unspecified point in the future, Cridland wants him to start talking dates. Otherwise, he says, some of our top business talent will start disappearing to more hospitable shores.

It's easy to see a link from all this tax controversy to the weekend speculation that HSBC is thinking about moving its HQ to Hong Kong. This idea has been mooted for a while, particularly given the bank's strong ties to the region, and it apparently reviews its position every three years anyway. But the Sunday Telegraph yesterday quoted one of the bank's biggest investors as saying that a move is 'now more than likely'. The bank has subsequently played down the reports, describing talk of an imminent move as 'entirely speculative and presumptuous'.

However, there was also a thinly veiled threat: the 'preference' was to stay here, the bank said, but 'in light of possible regulatory changes and additional costs such as the bank levy', more and more shareholders were asking about 'the additional cost of being headquartered in the UK'. In other words, if you're not nicer to us, we walk.

And why wouldn't they? If the Government is taxing its top earners at a rate above the international average, and imposing a levy on its profits, and making its life difficult politically, it wouldn't be surprising if they decide to invest elsewhere. Which really wouldn't be the kind of pro-growth move the Government wants to see.

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