That is an important point about forestalling, which I will talk about in more detail later.
I note that the Office for Budget Responsibility’s March 2012 “Economic and fiscal outlook” states on page 110 that
“the revenue-maximising additional tax rate is around 48%.”
Again, that blows a hole in the Government’s argument that their reduction of the additional rate was based on sound economic and revenue-raising evidence. That is why they should now commit to carrying out a full report, as the new clause would compel them to do. I would argue that 48 is slightly closer to 50 than to 45.
The Chancellor told the House in 2012:
“The increase from 40p to 50p raised just a third of the £3 billion that we were told it would raise.”—[Official Report, 21 March 2012; Vol. 542, c. 805.]
I know my A-level maths is a little shaky, but that still makes £1 billion, a significant sum to the good people of Carmarthenshire and the good people of Wales and the rest of the UK. The Chancellor’s justification for the tax cut for the super-wealthy was that they would avoid the tax, they might leave the UK, it raised only £1 billion, and the reduction would lose the Government only £100 million. Having brought forward their income to avoid the 50p rate in the first year, the rich delayed it in the final year to benefit from the reduction to 45p. That forestalling and deferment will have cost the Treasury billions that could have been used to avoid some of the worst cuts to those on low incomes, such as those resulting from the bedroom tax.
Recent claims by some on the Government Benches that the tax cut for the richest has yielded more revenue conveniently gloss over the increased likelihood of those with an accountant being able to move their income into the following year, given the Government’s indication a year ahead of time that they were enacting the tax cut. My advice to the Government would be to enact the proper closing of loopholes to ensure that the super-wealthy pay their fair share, instead of the fig leaves of action that the Government have offered previously. They have still not introduced proper measures to make up the HMRC estimate of £35 billion lost each year through avoidance and evasion. Other estimates put the figure much higher. Claims that the rich were fleeing because of the 50% rate are also not very well grounded. Research by the TUC, using HMRC figures, indicated that 59% of those paying the 50% additional rate were employees, most working in banking and therefore unable to leave.