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OECD warning over 50% rate

The UK’s top rate of personal income tax is ‘substantially above the OECD average and likely to adversely affect work incentives and entrepreneurship’ according to an OECD report. Consideration should be given to reducing the rate to close to 40% it said.

‘The key focus of [UK] tax policy reforms is to be growth-friendly while addressing not only short-term but also longer-term challenges (such as population ageing) to sustainable public finances ’ the report said.

‘The key to a durable recovery will be achieving sustainable private-sector led growth. This points to reducing the extent to which tax distorts business and household decisions particularly incentives for work saving investment and entrepreneurship; and to raising additional taxation through reforms that broaden the tax base while reducing (top) marginal rates.’

Other key recommendations included:

  • evaluation of the effectiveness of the current zero and reduced VAT...

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