It’s official: high earners delayed their bonuses to take advantage of Cameron’s 50p tax cut
The Office for Budget Responsibility (OBR) yesterday made it official: high earners delayed their bonuses to take advantage of Cameron's top rate tax cut.
Tax receipts were up by 7 per cent this year compared to last. What the government hasn’t said, however, is that the £2.9bn spike in receipts is down to high earners avoiding the 50p tax rate to take avantage of George Osborne’s new 45p rate.
The Office for Budget Responsibility (OBR) yesterday made that official:
“Growth in both income tax and NICs for the year-to-date is above the full year forecasts, but this largely reflects the fact that receipts in the first few months of the year benefited from the deferral of some income/bonuses to take advantage of the reduction of the additional rate of income tax to 45p and some temporary effects in non-PAYE income tax. Prospects for PAYE and NIC receipts growth will depend on the feed-through from the low growth in average weekly earnings in the latest data.”
Not only the OBR, but the Institute for Fiscal Studies (IFS) make the same point:
“However, it is important to note that some of the strong growth in receipts observed earlier in the year may not be expected to persist for the rest of the financial year, as it may be the result of some high income individuals pushing part of their income from last year into the beginning of this tax year in order to take advantage of the reduction in the higher rate of income tax.”
There are no prizes for guessing whether the Exchequer is better or worse off with individuals paying the 45p as opposed to the 50p rate of tax.
Commenting on the OBR and IFS’s remarks, Labour’s shadow chief secretary to the treasury Chris Leslie said that while that while the delayed bonuses “artificially boosts this year’s borrowing figures, overall the Treasury will have lost millions of pounds as a result of the highest earners deferring income to pay tax at a lower rate”.
“This is yet more proof that David Cameron stands up for the wrong people. While those at the top are reaping the benefits of a huge tax cut, ordinary people on middle and low incomes are seeing their living standards fall,” he added.
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