Post by totheleft3 on Oct 25, 2022 15:54:39 GMT
By Full Fact more evidence that the rich don't desert the country when taxation for them increases.Did Labour's 50p tax rate drive 10,000 millionaires out of the country
5 DECEMBER 2012"On the issue of the top rate of tax, when the right hon. Gentleman's Government put it up to 50p, what it actually meant was that many fewer millionaires paid it, as a result of which the tax take suffered by £7 billion....In 2009-10, 16,000 people were earning more than £1 million, with a tax liability of £13 billion.
In 2010-11, when the rate went up, this plummeted to 6,000 people with a tax liability of £6.5 billion. Therefore, his 50p election gambit cost the country £7 billion."David Cameron, Prime Minister's Questions, 5 December 2012"Two-thirds of millionaires left Britain to avoid 50p tax rate"Daily Telegraph, also in Daily Mail, 28 November 2012
The Prime Minister and Leader of the Opposition again clashed at Prime Minister's Questions today, this time on the subject of the 50p additional rate of tax. But can we rely on Mr Cameron's analysis?
Sourcing the figuresFigures estimating the number of individuals with incomes over £1 million and their estimated total tax liabilities are available from HM Revenue and Customs (HMRC).
From these we can immediately see where the Prime Minister, Daily Mail and Daily Telegraph have drawn their figures from.Looking at the figures for 2009/10 - the last full financial year under Labour - there were 11,000 taxpayers with incomes over £1 million and 5,000 taxpayers earning over £2 million income - a total of 16,000 'millionaires' on an income-based definition.
These 16,000 were collectively liable for £13.4 billion.However in 2010/11 - the first financial year under the 50p additional rate of income tax , the number of declared 'income millionaires' plummeted to 6,000, liable for only £6.5 billion. In other words, the number of income millionaires fell by 10,000 and the tax liabilities fell by £6.9 billion - the figure ussed today by David Cameron
.So does this amount to an "exodus" of millionaires and taxes from the country?That's where the problems for the claimants start. Last week, Tax Research UK pointed out that drawing these conclusions ignores the elephant in the room: the fact thatHMRC itself found evidence of £18 billion worth of 'forestalling' in the first 50p year
.In HMRC's own words:"...there was a considerable behavioural response to the rate change, including a substantial amount of forestalling: around £16 billion to £18 billion of income is estimated to have been brought forward to 2009-10 to avoid the introduction of the additional rate of tax.
"This suggests that the figures for 2009-10 are larger than would have otherwise been the case if the policy hadn't been announced and these people hadn't brought forward their declared income (certain people can alter the 'timing' of their income, sometimes to avoid changes in rates).
HMRC confirm this in their latest statistics release:"Forestalling in 2009-10 exerts a significant influence on the projected profile of combined liabilities due at higher and additional rates of tax
. These are projected to have fallen in 2010-11 as incomes for the richest decline from forestalled to below 'normal levels', but recover in later years as these special factors subside, and economic recovery is assumed to build."
Claiming that thousands of millionaires simply 'left' the UK thus misses the point: a simple look at the figures shows that the overall number of taxpayers remained almost unchanged between 2009/10 and 2010/11.
Following the introduction of the rate, much of the deterioration in declared incomes over £1 million will have been a result of abnormally high levels in 2009/10 due to forestalling.
Where forestalling occurs, we can also reasonably expect an 'unwinding' effect were the income figures will return to stability, which again demonstrates the partial picture painted by taking only the first year's effect of the policy in drawing conclusions about it's overall impact.
This isn't to say the policy wasn't significantly diluted by other changes in taxpayers' behaviour. As Full Fact discussed in August, HMRC's own analysis back in March this year measured the behavioural impacts:ConclusionIn jumping to conclusions from the apparently startling HMRC figures, the Prime Minister, Telegraph and Mail present a distorted picture of the effects of the 50p rate. HMRC itself has warned that the figures are affected by forestalling in the last year before the 50p rate was introduced, so the reduced tax liabilities for income millionaires will likely have been unusually high in 2009/10
5 DECEMBER 2012"On the issue of the top rate of tax, when the right hon. Gentleman's Government put it up to 50p, what it actually meant was that many fewer millionaires paid it, as a result of which the tax take suffered by £7 billion....In 2009-10, 16,000 people were earning more than £1 million, with a tax liability of £13 billion.
In 2010-11, when the rate went up, this plummeted to 6,000 people with a tax liability of £6.5 billion. Therefore, his 50p election gambit cost the country £7 billion."David Cameron, Prime Minister's Questions, 5 December 2012"Two-thirds of millionaires left Britain to avoid 50p tax rate"Daily Telegraph, also in Daily Mail, 28 November 2012
The Prime Minister and Leader of the Opposition again clashed at Prime Minister's Questions today, this time on the subject of the 50p additional rate of tax. But can we rely on Mr Cameron's analysis?
Sourcing the figuresFigures estimating the number of individuals with incomes over £1 million and their estimated total tax liabilities are available from HM Revenue and Customs (HMRC).
From these we can immediately see where the Prime Minister, Daily Mail and Daily Telegraph have drawn their figures from.Looking at the figures for 2009/10 - the last full financial year under Labour - there were 11,000 taxpayers with incomes over £1 million and 5,000 taxpayers earning over £2 million income - a total of 16,000 'millionaires' on an income-based definition.
These 16,000 were collectively liable for £13.4 billion.However in 2010/11 - the first financial year under the 50p additional rate of income tax , the number of declared 'income millionaires' plummeted to 6,000, liable for only £6.5 billion. In other words, the number of income millionaires fell by 10,000 and the tax liabilities fell by £6.9 billion - the figure ussed today by David Cameron
.So does this amount to an "exodus" of millionaires and taxes from the country?That's where the problems for the claimants start. Last week, Tax Research UK pointed out that drawing these conclusions ignores the elephant in the room: the fact thatHMRC itself found evidence of £18 billion worth of 'forestalling' in the first 50p year
.In HMRC's own words:"...there was a considerable behavioural response to the rate change, including a substantial amount of forestalling: around £16 billion to £18 billion of income is estimated to have been brought forward to 2009-10 to avoid the introduction of the additional rate of tax.
"This suggests that the figures for 2009-10 are larger than would have otherwise been the case if the policy hadn't been announced and these people hadn't brought forward their declared income (certain people can alter the 'timing' of their income, sometimes to avoid changes in rates).
HMRC confirm this in their latest statistics release:"Forestalling in 2009-10 exerts a significant influence on the projected profile of combined liabilities due at higher and additional rates of tax
. These are projected to have fallen in 2010-11 as incomes for the richest decline from forestalled to below 'normal levels', but recover in later years as these special factors subside, and economic recovery is assumed to build."
Claiming that thousands of millionaires simply 'left' the UK thus misses the point: a simple look at the figures shows that the overall number of taxpayers remained almost unchanged between 2009/10 and 2010/11.
Following the introduction of the rate, much of the deterioration in declared incomes over £1 million will have been a result of abnormally high levels in 2009/10 due to forestalling.
Where forestalling occurs, we can also reasonably expect an 'unwinding' effect were the income figures will return to stability, which again demonstrates the partial picture painted by taking only the first year's effect of the policy in drawing conclusions about it's overall impact.
This isn't to say the policy wasn't significantly diluted by other changes in taxpayers' behaviour. As Full Fact discussed in August, HMRC's own analysis back in March this year measured the behavioural impacts:ConclusionIn jumping to conclusions from the apparently startling HMRC figures, the Prime Minister, Telegraph and Mail present a distorted picture of the effects of the 50p rate. HMRC itself has warned that the figures are affected by forestalling in the last year before the 50p rate was introduced, so the reduced tax liabilities for income millionaires will likely have been unusually high in 2009/10
