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The 50% Additional Income Tax Rate: Arguments for and against Essay Example

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The 50% Additional Income Tax Rate: Arguments for and against

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The 50% Additional Income Tax Rate: Arguments for and against. The UK had would essentially succumb to a non-competitive regime of tax. A study was conducted by KPMG in 2010 when the country was using the 50p rate showed how badly the country compared to other European nations with reference to personal income tax rates where the UK was ranked number 83 out of 86 countries. A number of high rates taxpayers are regarded as creators of wealth due to other ability to forecast economic trends and pursue economically viable investments (Bell 1995). By taking a large proportion of their income, this category of taxpayers has resulted in adopting a number of measures to deal with the issue. The measures implemented range from retiring early and working less, moving to other countries that have a lower tax rate, using more of their time and resources to schemes that promote tax avoidance, postponing their incomes to the future through methods such as refusing to pay dividends and bonuses, transferring their assets which generate income to their family members or relatives who are faced with lower tax rates, by forwarding more of their income to provident and pension funds which are not taxed as punitively and by holding and adding funds in firms and settling to sell the firms in the future when capital gains tax rates are more favorable (Derry 1993).

According to a YouGov policy survey conducted in 2010 when the UK was using the 50p plus marginal tax, of the firms in the financial sector surveyed close to 25% of them were either considering leaving or had already relocated their businesses out of the country and an additional 2% of those interviewed were in the process of relocating to more accommodating countries such as Sweden. YouGov also interviewed a variety of senior managers and close to a quarter of them predicted that their firms would relocate parts of their operations to other countries in the near future and cited the punitive tax regimen as the primary factor when making that decision. A very small percentage thought that their firms were going to increase their operations in the UK. The 50% Additional Income Tax Rate: Arguments for and against.

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References

Apps, P., 2011. Welfare Options Under Less Progressive Tax Rates: An Analysis of Distributional Effects for Working Families. The Australian Economic Review, 52-65.

Bell, D., & Levin, E., 1995. Tax clientele bias in the term structure of UK interest rates. Stirling: Dept. of Economics, University of Stirling.

Derry, A., & Pradhan, M., 1993. Tax specific term structures of interest rates in the UK government bond market. London: Economics Division, Bank of England.

Engel, Eduardo M. R. A., and James R. Hines., 1999. Understanding Tax Evasion Dynamics .Cambridge, MA: National Bureau of Economic Research. Print

Genders, D., 2013. The Daily Telegraph tax guide 2013 understanding the tax system, completing your tax return and planning how to become more tax efficient. London: Kogan Page.

Horan, S. n.d., 2010. Withdrawal Location with Progressive Tax Rates. Financial Analysts Journal, 77-87.

Levin, E., & Wright, R., 1998. How large is the tax clientele bias in the term structure of UK interest rates? Applied Economics Letters, 429-432.

Midwinter, Arthur F., and Claire Monaghan., 1993. From Rates to the Poll Tax: Local Government

Finance in the Thatcher Era. Edinburgh: Edinburgh UP. Print.

Robson, M., 1988. Estimating tax rates on income from capital in the UK from official statistics. London: LSE Financial Markets Group.

Rym, E., 2004. Average marginal tax rates in the UK economy. Applied Economics, 2369-2372.

Wealth Management Planning The UK Tax Principles. 2010. John Wiley & Sons.

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