Today, a series of business leaders have written a letter to the Daily Telegraph calling for the 50p top rate of tax to be cut to help boost the economy. They claim it will attract wealth generators and entrepreneurs to the UK. They are quite simply wrong, and are simply trying to disguise their own greed in the fig leaf of economic recovery.
Entrepreneurs rarely change country in order to set up their business. Most incoming investment is made by existing business, which looks at all sorts of factors when deciding whether to invest. Chief amongst these are a skilled and educated workforce, the right infrastructure, and ability to reach the right markets. Whether the CEO will end up paying a bit more tax if he moves there is going to be quite far down the list. After all, if paying higher tax is good enough for Warren Buffett, it’s good enough the likes of Ian Powell, the chief executive of PricewaterhouseCoopers.
But what is needed to attract investment and create growth – and especially jobs? Well, the majority of new jobs created – over 65% – are created by firms employing less than 100 people. The top rate of tax isn’t what is preventing these firms taking on new staff. It’s not, as Stephen Pollard from the Jewish Chronicle tried to claim on Question Time last night, red tape and regulation which is preventing companies taking on staff either. It’s a lack of bank lending, as highlighted by this report from BCVA.
Red tape doesn’t prevent someone from taking on staff for a short term contract, as Mr Pollard tried to claim had prevented him from taking on people at his newspaper. Short term contracts are perfectly legitimate, especially if there are specific projects people are required to work on. My own employer has used people on such a basis for many years.
We need to encourage the real entrepreneurs – the hundreds of thousands of ordinary people up and down the country who start (or want to start) a business. And they don’t worry about the 50% tax rate – most would be happy to be making enough profit to pay 40% tax, let alone be amongst the top 1% of income earners in the country.