Should the top-rate tax be less than 40 per cent?

Britain will soon be a leaking ship – it’ll lose £1 billion per year by 2015, if George Osborne stubbornly sticks to the 50 per cent top tax rate. As other countries have moved to attract the wealthy, the UK has actually taken a step backwards, according to a new report. And there are losses that are harder to quantify – dampers on productivity and entrepreneurship, and deterrents to high earners from coming here. So what’s the optimum tax rate? Less than 40 per cent, says the Centre for Economics and Business Research.

The 50 per cent rate for people earning over £150,000, introduced by Alistair Darling, was meant to fatten Britain’s coffers by up to £3 billion. Instead, it’s destined to lose money. The report from the CEBR neatly sums up what’s wrong, and could go even more wrong, if Osborne clings to this politically-pleasing-but-fiscally-foolhardy tax regime.

1. The UK is plunging in tax competitiveness

All over the world, nations are using income tax as a tool to attract high-income individuals, slashing top rates and the like.