New research this week has found that Britain is charging some of the highest tax rates in the world for its richest and poorest workers. Out of twenty major economies, Britain is ranked seventh for the amount of tax it takes from its very highest and very lowest earners.
Experts are concerned that high tax rates in the UK are driving away high earners to other countries where the tax rates are much lower.
British government takes more tax than many other nations
The research published in the Daily Telegraph found that Brits earning over £122,000 a year take home just 60.9 per cent of their pay after paying tax. In Russia they would keep 87 per cent and in Egypt 80.4 per cent, whilst earnings in Dubai are tax free.
Britain is ranked seventh highest in terms of the tax it takes from its workers. Italy has the highest tax rates for the wealthy as workers earning £122,000 keep just 54.1 per cent of their earnings. High earners in the Netherlands keep 54.7 per cent of their pay whilst in Ireland and Germany they would take home just 56 per cent.
Francesca Lagerberg, head of tax at accountants Grant Thornton, said: “This provides evidence of the detrimental effect of high tax rates on high earners. For Britain to be competitive, action is needed to discourage a brain drain.”
Mark Giddens, a partner at UHY Hacker Young, agrees: “The 50 per cent tax rate on people earning more than £150,000 a year, combined with increases in national insurance, has undoubtedly made the UK less attractive to high earners. Many of these people will be highly skilled and they are usually very mobile.”
He added: “What is surprising to us is the wide difference between countries in terms of tax burden placed on high earners.
“With the exception of Israel, the countries which tax high earners the most are EU members. The countries with the lightest tax burden on high earners – with the exception of Japan and the United States – are emerging economies.”
Britain also taxing low earners more heavily than other nations
The figures from accountants UHY also found that Britain takes more tax from its lowest earners than thirteen other major countries. People earning under £15,242 in the UK keep just 83.2 per cent of their earnings compared to 95.7 per cent in Ireland and just over 90 per cent in the USA and Japan.
The research found that only Mexico, Estonia, France, Germany, Italy and India deduct more tax and national insurance contributions from their lowest paid workers than Britain. German workers get to keep 72.6 per cent of their income whilst low paid French workers keep 75 per cent.