London's Evening Standard reports that the flight of financiers from the new 50 percent tax rate is gathering pace. The Chairman of Terra Firma Capital Partners is said to have moved to Guernsey, and the head of Odey Asset Management hedge fund has threatened to move his firm offshore. He is quoted as saying, "Everyone is thinking of leaving."
While the ones who can go probably will go, the majority will not enjoy this mobility. What they will do, however, is to make every possible use of shelters to lower their exposure to the tax. Many people who paid it at 40 percent will move heaven and earth to avoid paying it at 50 percent. This is one reason why I publicly predicted on CNBC as the tax was announced that it will raise less money than was yielded by 40 percent. The other reason, apart from avoidance, is that the reduced incentive the new tax offers will shrink the tax base. If people have to give nearly two-thirds of any extra income to be squandered by the government, they will simply not make great efforts to earn any. Any adding in National Insurance and pension allowance changes mean that many people will be keeping only just over a third of any extra they earn.
The upshot is that Britain has moved into the unenviable league of top tax nations, and probably without gaining any extra revenue by doing so. This was the most dreadful feature of a truly contemptible budget.