Britain's 50p tax rate is fourth-highest in Europe


Nikhil Kumar
Thursday 29 September 2011 00:00 BST

Top earners in Britain face the fourth-highest rate of personal income tax in the EU, with only Sweden, Denmark and the Netherlands asking for more, according to figures from the accountancy firm KPMG.

The 50p top rate introduced by the last Labour Government kicks in at incomes above £150,000, and places the UK at joint No. 4 in the European high tax league, alongside Belgium and Austria. Withdrawal of the personal allowance on incomes over £100,000 means the marginal rate of tax is even higher, at 60 per cent, KPMG said.

Internationally, out of 96 countries surveyed, only five had top-rate taxes on a par or higher than the UK's. Aruba took the crown. The tiny Caribbean island imposes a top rate of 59 per cent. Japan was the only other non-European country with a 50 per cent rate.

The figures come amid tensions in the Coalition over whether to scrap the 50p rate. Liberal Democrats have signalled their opposition to any change, unless it is accompanied by reforms to lower the burden on those at the bottom of the income ladder, but the Chancellor, George Osborne, has said the measure is temporary.

Feeding into the political debate are questions about the effectiveness of the top band of tax. An Institute of Fiscal Studies report earlier this month, for instance, warned it is "not clear" if the 50p rate will raise any revenue for the Treasury, as high earners find ways to avoid paying up.

"With doubts around what the 50 per cent top rate of tax is actually yielding, is the highest top rate of personal tax really a table that we want the UK top?

"Headline rates matter as they are what everyone notices," Marc Burrows, a partner at KPMG, said.

The survey also showed there had been little change in tax rates across top economies over the last year. In 2011, debt-ridden Spain was the only country out of the world's top 20 economies by GDP that imposed changes in the top rate of personal income tax.

Regionally, western Europe, with an average top rate of 45 per cent, had the highest level of tax for high earnings, well above the 23 per cent average seen across Asia.

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