Let’s be thankful for ‘The Top 1 Per Cent’

26 Oct

Day in, day out, the public is bombarded with misguided comment on top earners by politicians, so–called ‘tax activists’, and others.

There are daily rallying calls in the media for the ‘rich to pay more’, ‘to soak the rich’, and for ‘those who have the most to contribute the most.’

But the latest HMRC figures confirm what I have been saying for a very long time: that the wealthiest in our society are, indeed, doing their fair share, and that claims that high earners are not contributing is nonsense.

The Revenue’s numbers show that the best-paid 1 per cent in the UK will contribute nearly a third – 29.8 per cent, to be exact – of all income tax in 2013-2014.  The ‘top 1 per cent’ is currently classified as those earning £160,000 a year or more.

The 18,000 people whose annual income is more than £1m will contribute nearly 12 per cent of all tax, whilst the6,000 who are on more than £2m a year will collectively pay £13.2bn – which is more than the total raised by the12.5 million taxpayers who earn less than 20,000 per annum.

So, despite the fact that the best-paid 1 per cent will earn nearly 14 per cent of all the income in the UK, that same 1 per cent will pay almost 30 per cent of all income tax collected.

This scenario is not a UK-only phenomenon – it’s a confirmed trend in many, if not most, developed countries.

For instance, in the US, the top 1 per cent (who earn about 13 per cent of all US income) paid around 38 per cent of all income tax last year.

Clearly, high earners are a vital source of funding for governments, their income taxes unquestionably boost national coffers in a major way and on many levels.

Yet rather than having their efforts and contributions -which significantly contribute to the funding of schools, hospitals, the armed forces, police, roads, to select a handful of things – praised, or even acknowledged, the top one per cent are typically berated by the mainstream press and by vote-seeking, naïve, ‘economically unaware’politicians, amongst others.

And, if that wasn’t enough, many politicians are, and have been, expressing the view that income tax levels should be increased further to ensure the rich ‘shoulder the burden’.

Should this happen, I predict that there will be a flight of the top earners from those countries to jurisdictions with a more competitive tax regime.  There is, as I have said many times previously, a point (the Laffer curve illustrates this) where increasing tax liabilities is a disincentive to investment and growth.  On the flip side, reducing the top rate of tax will make a country a more attractive place towork and will encourage investment, and therefore growth, employment and income.

Nigel Green deVere Group

Blog written 26th October



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