Cut higher rate income tax, urges think-tank

15 July 2010

The government should consider reducing the 50 per cent income tax rate for high earners if the UK economy is to become more productive and competitive, a leading think-tank has argued.

The Paris-based Organisation for Economic Co-operation and Development (OECD) said that the high rate of income tax was "likely to adversely affect work incentives and entrepreneurship, particularly of high skilled workers" and that "consideration should be given to reducing the top rate to close to 40 per cent".

Factoring in national insurance charges and reductions in tax relief on pensions, the OECD calculated that nearly "two million working heads of households are facing marginal combined deduction rates of over 60 per cent".

The report went on to say: "Simplifying the tax-benefit regime and improving work incentives would be a highly desirable medium-term objective."

Angel Gurria, the OECD's secretary general, added: "The UK has to become more productive and more competitive."