Nick Clegg today demands the introduction of a “tycoon tax” which will mean that wealthy Britons have to pay a minimum rate of tax on their total annual earnings of more than 20 per cent.

Nick Clegg goes after the ultra-rich

By Robert Winnett, and James Kirkup

09 Mar 2012

The Deputy Prime Minister says he has uncovered evidence that
hundreds of millionaires are paying a tax rate of less than 20 per
cent on their earnings by using an “army of lawyers and accountants”.

In an interview with The Telegraph, Mr Clegg indicates he is willing
to support the scrapping of the 50p top rate of income tax provided
that millionaires are “properly” taxed in Britain.

A wide array of tax loopholes and reliefs are exploited by the wealthy
to reduce their tax bills, leading to them paying overall rates on
annual earnings beneath those faced by ordinary workers, he said.

Mr Clegg, who will be at Saturday’s Liberal Democrat spring conference
in Gateshead, believes that thousands more millionaires pay tax at a
rate of less than 30 per cent, depriving the Exchequer of hundreds of
millions of pounds a year.

He believes that a specific minimum rate of tax should be written into
law to ensure people are “paying their fair share” and not “massaging”
the system. The Deputy Prime Minister says he decided on the need for
a tycoon tax after Mitt Romney, who is expected to be the US
Republican Presidential candidate, disclosed he was paying just 13.9
per cent tax on his multi-million-dollar earnings.

Mr Clegg said: “You hope that kind of thing doesn’t go on in this
country. So I looked into it. There are hundreds of people earning
millions per year who are barely paying 20 per cent tax, forget 40 per
cent, forget 50 per cent, forget 30 per cent. They are not even paying
20 per cent. Therefore, I think it’s time that we look at what I call
a tycoon tax.

“If you’re earning millions per year, if you’re able to pay an army of
lawyers and accountants to basically pick and choose what tax you are
paying, if you are paying as low as 25, 20 per cent or even less in
tax, there should be a minimum fair share that you should pay to
society. It makes people so incredibly angry when you are getting up
early in the morning, working really hard to try and do the right
thing for your family and for your community, you are paying your
taxes and then you see people literally in a different galaxy who are
paying extraordinarily low rates of tax.”

In today’s interview, Mr Clegg said that he would like to see a
minimum tax rate written into law in Britain but was undecided on the
figure. However, it is understood the level could be set between 20
and 30 per cent. Mr Clegg today plays down recent speculation that
George Osborne’s budget this month will be used to introduce a
“mansion tax” on multi-million-pound properties, or to cut tax relief
on pensions for higher-rate taxpayers. Both have been long-standing
Liberal Democrat proposals but the Deputy Prime Minister says today
that radical changes to the pension system are a “longer-term debate”.

Over the past few weeks there has been growing speculation that the
so-called quad of senior Coalition ministers – David Cameron, George
Osborne, Nick Clegg and Danny Alexander – were working on a deal to
agree to scrap the 50p rate of income tax in return for new property
or pension taxes.

The call for a tycoon tax is the first official indication that the
50p rate is ineffectual as those it is designed to target are avoiding
the levy in large numbers.

Mr Clegg says today that he is not “fixated” on the top rate and that
it is a “temporary measure”. He also plays down a mansion tax, saying
that introducing the tycoon tax was “far more important”. “I think the
principle of a mansion tax is a perfectly sensible one,” he said.
“[But] the overall approach to bearing down on avoidance, closing
loopholes, making sure the wealthy pay more of their fair share than
less — that is what is more important to me at the end of the day.”

On the prospect of cutting tax relief on pensions, he says the issue
needed to be approached with “a great deal of care” because “we want,
of course, to make people feel like there is an incentive to save”. He
added: “This is again a longer-term debate, but we need to make sure
that any tax relief that is provided is as fairly distributed up and
down the income scale as possible.”

Mr Clegg hopes to use extra revenues raised from the wealthy to fund
an “acceleration” in the rise in the tax threshold so that ordinary
workers do not pay income tax on the first £10,000 of their earnings.

The Institute of Fiscal Studies estimated yesterday that raising the
threshold to £10,000 next year would cost the Exchequer £7.7 billion.
It warned it would not benefit the poorest third of families, who
already earn less than the threshold, with the biggest benefits
enjoyed by better paid basic-rate taxpayers.