IFS warns that 50p tax rate costs Treasury £500m

Wednesday, 14 September 2011 09:36

The 50p rate of income tax is costing the Treasury up to £500 million a year as high earners keep their money on foreign soil, a leading think tank has warned.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said the top rate of income tax looks to be too high and could be reducing tax revenues.

"It could lead to more people investing in tax avoidance, illegally hiding their income or even leaving the country altogether. I wouldn't have introduced the 50p rate in the first place," he added.

The IFS went on to suggest that Britain's "inefficient, overly complex and frequently unfair" tax system needs to be completely revamped.

Income tax and national insurance should be merged, it stated, while stamp duty should be abolished and corporation tax should be radically reformed.

VAT should be extended to nearly all spending and fuel duty should be replaced with a national congestion charge, it added.

The Mirrlees Review went on to suggest that an overhaul of the system would pump billions of pounds into the economy and create thousands of jobs.

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