London will become the most highly taxed financial centre in the world when the new 50 per cent income tax rate for those earning £150,000 or more comes into force next month. Taxes will be higher than for financial workers living in the other key centres of New York, Paris, Frankfurt, Geneva, Zurich, Dubai and Hong Kong, KPMG calculated.
The findings will raise fears that Labour’s levies are driving businesses and bankers overseas and threatening Britain’s competitiveness.
Exodus: There are fears that Labour’s new 50 per cent income tax rate for those earning £150,000 or more, will drive businesses and bankers overseas
He also accused Labour of ‘criminal negligence’ by racking up a budget deficit in the boom times rather than saving money for a rainy day.
‘The UK economy is an utter disaster on any number of fronts,’ Mr Smith said.
Tullett announced last December that it will help employees move abroad if they want to avoid the top rate of tax, and Mr Smith said workers are already looking at relocating.
Graeme Leach of the Institute of Directors said: ‘The 50 per cent rate is a policy that should never have been announced. The indirect impact on entrepreneurial aspiration, business confidence and foreign investment is likely to be significant.
‘We suspect that little or no money will be raised and we urge the next government to reverse the increase as soon as possible.’
Labour’s windfall tax on city bonuses has also led to anger in the City. That imposes a 50 per cent one-off charge on the banks themselves for any bonus that they pay out in excess of £25,000.
However the banks have not changed their behaviour. They are still handing out multi-million pound packages, but are forcing shareholders to pay for the levy, rather than risk annoying their top traders by taking it out of the bonus pool.
Tax minister Stephen Timms denied last week that the higher rate would harm the UK.
He said: ‘It affects one per cent of the population. It is right that those with the broadest shoulders bear their share of responsibility during the consolidation.’
London today ranks sixth out of the eight key financial centres, in terms of the tax burden for high earners.
But when the new rate comes into force the UK jumps to the top of the list with the most onerous tax burden for any worker earning £500,000 or more.