The Government are committed to ensuring that everyone pays their fair share of tax. The percentage of total income tax paid by the top 1% will be more than 27% in 2012-13 and in subsequent years, compared with an average of less than 23% between 1997 and 2010. Budget 2012 announced a package of measures to ensure that those on the highest incomes contribute more. This includes a cap on previously uncapped income tax reliefs, which will increase effective tax rates.
The Prime Minister claimed in the House last week that the 50p top rate of tax had raised barely anything at all, yet the HMRC document sets out a figure of more than £1 billion, and the Minister confirmed in the House on the same day that it had raised £700 million. Should not the Prime Minister come to the House and set the record straight?
It is important to remember, though, that for 12 out of the 13 years that they were in government, the Opposition thought it appropriate to have a top rate of tax at 40p. Is not the important thing the yield that is raised by the top rate of tax, not having a tax rate that is punitive just for the sake of having punitive taxes?
22. Following on from the question from my hon. Friend and namesake the Member for Livingston (Graeme Morrice), we are aware that Treasury data published last week gave details of the levels of tax avoidance among top-rate taxpayers, but can the Minister confirm that someone earning £1 million a year will benefit to the tune of £40,000 a year from these taxes?
The point is that the assessment made by HMRC, supported by the assessment of the Office for Budget Responsibility, is that the 50p rate failed to raise the revenue that was anticipated. It failed to raise the revenue that we needed. Instead, we are taking measures that will succeed in getting money out of the wealthiest, not failing.
It clearly does not. It is striking that, as the HMRC report showed, the number of UK citizens moving to Switzerland rose by 29% when the 50p rate was introduced. It does nothing for our competitiveness. It does nothing to raise money. It was a failure of a policy.
17. According to the Institute for Fiscal Studies, one year is not long enough to judge the effectiveness of the 50p tax rate. According to HMRC, the taxable income elasticity is highly uncertain. Therefore, will the Minister admit that his decision to scrap the 50p tax rate was ideological, rather than based on some flimsy evidence that does not actually exist?
It is not flimsy evidence; it is evidence that shows two different models. It is consistent with the academic literature in this area, and it is supported as a central and reasonable estimate by Robert Chote, head of the Office for Budget Responsibility and former head of the IFS.