High earners targeted in UK drive to increase tax income
HIGHER EARNERS in the United Kingdom are to face higher taxes, while additional tax officials are to target people with offshore bank accounts in Liechtenstein and other tax havens as part of an effort to find £16 billion in savings and taxes in coming years, a senior British minister has said.
However, the threshold to be used to identify higher earners remains unclear, following contradictory signals at yesterday’s Liberal Democrats annual conference in Brighton. The average British salary is about £24,000 a year – anyone earning more than £50,000 a year is included in the top 10 per cent.
On being questioned, Lib Dem leader and deputy prime minister Nick Clegg said he was not focused “on the whole 10 per cent”, while chief secretary to the treasury Danny Alexander announced that a special Revenue and Customs unit would target those with more than £1 million in assets.
“The vast majority of taxpayers in this wealth bracket pay their fair share. We have this message to the small minority of wealthy people who don’t play by the rules: we are coming to get you and you will pay your fair share,” Mr Alexander told delegates.
Some welfare benefits enjoyed by higher earners, such as fuel allowances and bus passes for old-age pensioners, will have to be tackled in the lifetime of the next government, Mr Clegg acknowledged, but he accepted that little is likely to happen to them during this parliament because of pledges made by prime minister David Cameron before the 2010 election.
In 2009, the Labour government agreed a deal with Liechtenstein authorities to require UK residents with accounts to make voluntary declarations to revenue and customs.
“They thought it would raise a billion pounds. Under this government many more people are fessing up. So we are doubling the size of the team focused on Liechtenstein. With that extra effort we can recover much more from those who thought they could hide their money offshore. Up to three times more: £3 billion,” said Mr Alexander.
The methods to be used to extract more taxes from higher earners remain unclear, since those earning more than £150,000 a year will receive a cut of five percentage points in the top income tax rate – from 50p to 45p – next April, while the Conservatives and Liberal Democrats remain divided about higher property taxes.
Faced with Mr Cameron’s opposition to a so-called “mansion tax” on homes worth more than £2 million, some Liberal Democrats have called for changes to the existing local authority taxes – which are based on outdated property taxes – to ensure that the richest pay far more.
Emphasising the modesty of the Liberal Democrats’ proposal, Matthew Oakeshott said owners of homes worth £2 million or more would pay a 1 per cent annual charge on the value above £2 million. Only one home in 200 would be affected: “heavily concentrated in parts of London, fast becoming islands of opulence cut off from the rest of the country”, he said.
Currently, owners of Notting Hill mansions worth £40 million pay just over £2,000 a year in council charges, the same amount as that paid by those with homes worth more than £300,000 – “enough to cover a round of drinks at half-time for Roman Abramovich at Stamford Bridge”, he said.