'Tax change could force exodus' TOP EARNERS.
The Chancellor's decision to increase the rate of tax on the top tier of earnings was condemned by financial services firms after the Budget yesterday.
From next April, earnings over pounds 150,000 will be taxed at 50 per cent, up from 45 per cent at the moment, making the UK one of the highest-taxed countries in the Western world.
Alistair Darling set his sights solidly on high-earners, announcing additional plans to crack down on tax evasion and avoidance by "naming and shaming" offenders.
And he said tax relief on pension contributions would be restricted for people earning over the pounds 150,000 threshold, with Government contributions to highearning pensioners being tapered so it was the same as the 20 per cent rate the majority of people receive.
The plans were put in place with the idea of raising more revenue from taxes, but have sparked fears in the financial sector they could provoke high-earners to flee the country.
Narinder Paul, a personal finance partner at KPMG in Birmingham, said: "From 2010, the UK will have the highest income tax rate among the largest western economies. If they are losing half of their top end earnings, entrepreneurs, foreign workers and anyone else who can choose where they work are likely to think twice before making the UK their base.
"That said, with many people likely to see lower incomes this year due to the relative paucity of City bonuses, this measure may prove to be an unattractive headline grabber which does little to actually raise significant funds for the cash-strapped public coffers." Paul Willans, the chief executive of Mazars Financial Planning and a partner at international accountancy firm Mazars, added: "Following the Chancellor's decision to slash tax relief on pension contributions for higher earners to only the basic rate from April 2011, everyone assumed that there would be an opportunity to make hay while the sun shines by maximising payments in the interim two years.
"However, what the Chancellor didn't say during his speech was that he is also proposing an "anti-forestalling" provision that will limit tax relief where affected individuals seek to increase their pension savings in excess of their normal regular pattern prior to April 2011, where their total pension contributions exceed pounds 20,000 a year." And Robert Jackson, the chief executive of Solihull-based of Montpelier Chartered Accountants, said: "The Chancellor is proposing to borrow and spend our way of the recession. This strategy has not worked so far and will create one hell of a burden for the next generation.
"The Budget is doom and gloom for the high earner. It goes back to the heady days of Harold Wilson with a strategy of taxing the rich to pay-off the national debt. This could have a significant impact on the economy." Meanwhile, the Government forged ahead with plans to revise the corporate tax scheme for foreign profits, to bring the UK in line with tax-friendly countries like Luxembourg and The Netherlands.
But an anticipated offshore tax "amnesty" was set to be delayed until the autumn.
Andrew Noble, the head of tax at Birmingham law firm Browne Jacobson, said the tax announcements for businesses were "pretty modest once you check the detail".
"This illustrates the Chancellor's possible conflict of interest over the next year between his role as a politician with an eye on the 2010 election, and his job of trying to help balance the country's books again as quickly as possible," he added. "On the positive side, the stamp duty land tax 'holiday' of a starting threshold for residential property at pounds 175,000 will stay until the end of 2009, which should continue to help first-time buyers coming in at the lower end of the property market."
The view for top earners is not looking as bright after they were targeted by Alistair Darling
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|Publication:||The Birmingham Post (England)|
|Date:||Apr 23, 2009|
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