x Abu Dhabi, UAE Thursday 20 July 2017

UK coalition cuts high earners 50% tax rate to be 'competitive'

Britain is to cut the 50 per cent tax paid by high earners and close a loophole allowing wealthy foreign owners to avoid paying duty when they sell homes in the UK.

George Osborne, the UK Chancellor of the Exchequer, centre, presents Britain's budget proposals outside 11 Downing Street, yesterday.
George Osborne, the UK Chancellor of the Exchequer, centre, presents Britain's budget proposals outside 11 Downing Street, yesterday.
LONDON // Britain is to cut the 50 per cent tax paid by high earners and close a loophole allowing wealthy foreign owners to avoid paying duty when they sell homes in the UK.
Budget proposals represented by Chancellor of the Exchequer George Osborne yesterday would also, he said, mark the start of far-reaching tax reform in Britain, which would raise the threshold at which the poorest started paying tax.
From next year, nobody earning less than £9,205 (Dh53,558) will not have to pay tax, a rise in the tax starting point of more than £1,000, resulting in an additional million people no longer being required to pay tax.
But it was the reduction of the 50 per cent tax for those earning more than £150,000 a year - dropping to 45 per cent next year - that caused outrage among opposition MPs and discomfort among Liberal Democrats, the junior coalition partners in the government.
The tax break for the rich has been designed to encourage entrepreneurs from home and abroad by showing that Britain has "a tax system that is more competitive for business than anywhere else in the world", according to Mr Osborne.
He said that the 50 per cent tax rate on the wealthy was the highest in the G20, raised "next to nothing" and was damaging Britain's competitiveness abroad.
Parliament will have to approve the budget, but the ruling coalition has a healthy majority.
However, opponents portrayed the move as another example of Prime Minister David Cameron's Conservative Party being primarily concerned with helping their rich and powerful friends.
In a bid to counter such arguments, Mr Osborne introduced a seven per cent "stamp duty" tax on sales by individuals of property worth more than £2 million, and a 15 per cent rate for properties in the ownership of foreign companies.
In doing so, he announced plans to close a loophole that enabled British or foreign owners to avoid paying the duty by registering ownership of properties in the names of offshore companies.
There remains scepticism, however, over the practicalities of enforcing this because of the difficulties of proving that, say, an offshore company in the Cayman Islands was solely set up to avoid paying the duty on a property sale.
Other moves will be taken to stop tax avoidance, Mr Osborne told the House of Commons, which would result in "the richest paying more".
But Ed Miliband, the Labour Party leader, poured scorn on the budget proposals, saying they marked the end of the government's claim that, because of the global economic downturn, "we're all in it together".
"Millions would be paying more, while millionaires paid less," Mr Miliband said, adding the chancellor had "failed the fairness test" by choosing to make his priority tax cuts for the wealthiest.
Owen Smith, Labour's treasury spokesman, added: "You'd need to be on another planet to think you can have a budget where we're going to cut taxes for the richest one per cent in this country and then plausibly describe that as fair. We think it is absolutely an extraordinary decision being taken at a point when ordinary families - with high inflation, low wages, massive cuts already to tax credits - when those families are feeling the squeeze."
Other measures announced included a reduction in the corporation tax for businesses to 24 per cent next month, making it lower than comparable taxes in the US, Japan, France and Germany.
Mr Osborne also announced a boost in investment to enable deep oilfields in the North Sea to be exploited to the fullest, and changes in the tax regime to encourage further oil and gas extraction.
And he held out the promise of a major reduction in red tape for businesses, funding for young people to start their own companies and a major drive to boost exports to countries like India, China and Brazil.
Mr Osborne also said that the country "must confront the lack of runway facilities in south-east England", raising fears of a third runway at Heathrow Airport or the construction of any entirely new airport in the Thames Estuary.
dsapsted@thenatonal.ae