What is Osborne going to do about the 50p income tax rate?

Tax accountants may be interested to learn that a group of influential economists have called on the Chancellor of the Exchequer to cut the controversial top 50p rate of income tax.

The group of twenty said they had concerns that the top rate was making the UK less competitive and a less attractive destination for talented workers and foreign investment, all of which will cause lasting damage to the nation’s economy.

The top rate has been justified as a tax on the wealthy but the economic damage done means it is also against the best interests of ordinary people.

The comments were made in a letter published in the Financial Times. Among the signatories were two former members of the Bank of England’s MPC, professors from the LSE, Glasgow and Warwick universities, as well as Bob Rowthorn, King’s college Cambridge’s Emeritus professor of economics.

George Osborne has always said that the 50p income tax rate was a temporary measure but he will not decide its fate until HMRC has concluded its revenue on its effectiveness. According to the Institute for Fiscal Studies the top rate is a risk worth taking.

The 50p income tax rate has caused a lot of debate in parliament. Liberal Democrat MPs, Danny Alexander and Vince Cable say it would be wrong to cut taxes for the rich. Alexander pointed out that a key coalition agreement was to prioritise reducing taxation for people on low and middle incomes.

However, the Tory stance is somewhat similar to the letter from the economists, in that the rate is giving the UK a disadvantage against other EU nations.

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