Based on the neuralgic reaction of some business leaders and politicians to Labour’s proposal to reintroduce the 50p tax rate, you might assume that the UK will become a pariah state if the measure is introduced. But how radical a move would it really be? For comparison, I’ve listed the top income tax rates (as of 2012) in the rest of the OECD below.
As the figures show, while a top rate of 50 per cent would be significantly higher than the average of 42.5 per cent it is far from the highest. Denmark, Sweden and Belgium (hardly socialist backwaters) are among the six countries with higher rates, while Austria and Japan also have a top rate of 50p.
And while plenty have accused Labour of “returning to the 1970s”, a top rate of 50 per cent would be far from the top rate of 83 per cent (98 per cent on “unearned income”) seen under Jim Callaghan. Even Margaret Thatcher managed to live with a top rate of 60 per cent for nine years of her premiership before Nigel Lawson reduced it to 40 per cent in his 1988 Budget. And, mercifully for the rich, Ed Balls has already said that there is “absolutely” no chance of Labour raising the rate beyond 50p.
Top marginal tax rate
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Denmark 60.2%
Sweden 56.6%
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Belgium 53.7%
Spain 52.0%
Netherlands 52.0%
France 50.7%
Austria 50.0%
Japan 50.0%
Greece 49.0%
Finland 49.0%
Portugal 49.0%
Italy 48.6%
Canada 48.0%
Ireland 48.0%
Israel 48.0%
Australia 47.5%
Iceland 46.2%
United States 41.9%
South Korea 41.8%
Switzerland 41.7%
Luxembourg 41.3%
Slovenia 41.0%
Chile 40.0%
Norway 40.0%
Turkey 35.7%
New Zealand 33.0%
Poland 32.0%
Mexico 30.0%
Estonia 21.0%
Slovakia 19.0%
Hungary 16.0%
Czech Republic 15.0%
Average rate 42.5%