Treasury’s own models suggested 69 per cent of those affected by the new rate would avoid or evade paying some of it

TO BE NOTED: From the FT:

"Treasury suggests rich will dodge tax

By Peter Marsh and George Parker

Published: April 26 2009 22:57 | Last updated: April 26 2009 22:57

Leading business figures on Sunday rounded on Alistair Darling over the new 50p top rate of tax introduced in last week’s Budget, as it emerged that the Treasury’s own models suggested 69 per cent of those affected by the new rate would avoid or evade paying some of it.

Entrepreneurs have added their voices to claims the new tax rate sent a damaging signal that could lead to an exodus of talent from Britain.

Arsene Wenger, Arsenal manager, claimed the move could make the English Premier League a less attractive proposition for international footballers.

The 50p rate, plus reduced personal allowances for those earning above £100,000, are likely to mean that some well-off people pay 60p in tax for every £1 of income over £100,000.

Sir Richard Branson, founder of the Virgin Group, said: “Higher taxes may be politically attractive in the short term, but I think this could be a real hindrance to the next wave of UK entrepreneurs and international companies looking to invest.”

Jon Moulton, chairman of Alchemy, a private equity company, said: “These measures are a blow to business at just the time when it needs some help.

“The move is likely to raise only a small amount of extra revenue and adds up to a diversionary tactic to deflect attention away from the government’s problems with public borrowing.”

Michelle Mone, the lingerie tycoon, revealed she has withdrawn her support for Labour over its economic policies, including the 50p rate, which she branded “a disgrace’’.

David Roper, chief executive of Melrose, an engineering company, said the new 50 per cent tax rate was the product of “the politics of envy”.

He said “a lot of people” who thought they might be hit by the tax changes were likely to rearrange their financial affairs to avoid paying them. “In some cases, it will mean people move out of Britain to places like Guernsey or Ireland.”

Richard Lambert, director-general of the CBI employers’ group, said he had spoken to some business people who were considering relocating as a result of the new measures, which were “highly unwelcome”.

However, Lord Haskins, former chairman of Northern Foods, said he was “quite happy” with the rate.

“Ten years ago, when Labour was trying to be positive about market forces, it would not have been acceptable politically for the party to introduce a 50p rate. But today when the government needs badly to raise new revenue, the situation is different,” he said.

However, the Treasury has privately conceded many wealthy people would either simply evade it or avoid it.

The Treasury did not deny a Sunday Telegraph report about its internal modelling suggesting 69 per cent of those affected would dodge some of the new tax.

It said the Budget made “cautious assumptions about any impact on tax revenue through behavioural changes”. The 50p rate is set to raise £2.4bn by 2012-13.

George Osborne, shadow chancellor, told the Financial Times: “If the Treasury really does have private estimates that more than half of the new top-rate taxpayers will seek to avoid the tax, they should publish these private estimates. We already know it was a dishonest Budget but it looks now like it was even more dishonest than we thought.”