UK raises tax rate 50%, revenue goes down...

Anyone surprised? You shouldn't be. The same would happen in the US. Until tax loopholes are closed, all raising taxes does is squeeze those who can't afford to exploit the loopholes. Read the original here.

50p tax rate 'failing to boost revenues’via UK Telegraph
By Robert Winnett, and James Kirkup
10:58PM GMT 21 Feb 2012

A Treasury source said the relatively poor revenues from self-assessment returns was partly down to highly-paid individuals arranging their affairs to avoid paying the 50p rate.

“It’s true that SA revenues are a bit disappointing — it’s still early, but it looks like there’s been quite a lot of forestalling and other manoeuvring to avoid the top rate,” said the source.

However, another Treasury source added that the tax deadline had been extended by two days because of industrial action at HM Revenue and Customs. Therefore, it was too early to begin assessing the revenues raised from the 50p rate of tax because about 20 per cent of self-assessment tax is paid in the hours before the deadline.

Francesca Lagerberg, head of tax at Grant Thornton, an accountancy firm, said: “My guess is that because the 50 per cent rate was flagged up in advance many taxpayers, particularly those with their own businesses, decided to extract dividends ahead of the change. It highlights the fact that high tax rates don’t always deliver high tax revenues.”

George Osborne, the Chancellor, is expected to receive a definitive analysis from the revenue on the 50p rate before next month’s Budget. The Liberal Democrats have insisted that it must stay because it is important to demonstrate that the rich are paying their fair share.

David Laws, a Lib Dem MP, has also suggested reducing tax relief on pensions for top earners.

The prospect of higher taxation on pensions comes as savers complain that low interest rates and quantitative easing have pushed down returns on savings and pensions.

Charlie Bean, the deputy governor of the Bank of England, last night insisted that those people should accept the pain as the price of restoring the wider economy to health.

The Confederation of British Industry, in its Budget submission today, urges ministers not introduce new levies on the rich, warning that the UK “will become a less attractive location for entrepreneurs and key employees”.