Mandelson At Odds With UK Govt Over 50% Tax

by Robert Lee, Tax-News.com, London

20 January 2010

Comments made recently by Business Secretary Lord Mandelson would appear to be at odds with the government's line that the incoming 50% tax rate on personal incomes will remain for the duration of the next parliament.

Suggesting that he has an "ideological objection" to the new top rate of tax, Mandelson told the Daily Telegraph in an interview that the 50p tax band should be scrapped as soon as fiscal conditions permit.

“Personally, I would favor, when financial circumstances permit, for the top rate to come down," he told the newspaper.

Mandelson's comments are significant as he is believed to be Prime Minister Gordon Brown's deputy in all but name, and he is thought to have a major say on government policy. Indeed, should the Labour government fall at the next election, his name could well be in the hat to take Brown's place as party leader.

First announced in last year's budget, the 50% rate of tax will apply to annual incomes of GBP150,000 or more from April 6. The measure is intended to help the UK reduce its mammoth budget deficit and soaring level of public debt, but many tax experts suggest that wealthy taxpayers will easily be able to outwit the Chancellor, for example, by converting income to capital gains or corporate income, which are taxed at lower rates.

For its part, the main opposition Conservative Party, which is poised to oust the government in the forthcoming general election, has issued uncertain statements over the future of the 50% tax. While party leader David Cameron has condemned the government's move as "a fantastically bad idea" and one motivated by class envy rather than sound fiscal management, he nevertheless has cautioned that a Conservative government would be reluctant to scrap the 50% tax immediately upon taking office.

“If you're right that it raises no revenue, even in the short-term, then clearly it would be painless and advantageous to get rid of it," Cameron told the Spectator in an interview last year. Nonetheless, the Tory leader was keen to emphasize that "fiscal responsibility" will be the watchwords should he become the next Prime Minister.

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