Senior talent not deterred by 50p tax rate, KPMG survey reveals

Top salary earners ‘are putting up with’ higher rate in difficult economic times

Employer fears that the 50p tax rate for high earners would prevent them attracting senior talent into the UK appear unfounded, according to research from KPMG.

The firm’s survey of 50 large companies showed a dramatic change in perception of the tax’s impact with only 13 per cent of employers saying it had hindered UK recruitment since it came into force in April 2010.

This is a huge change in sentiment from the same survey conducted in 2009, which found that 80 per cent of respondents thought the tax would deter senior executives looking for salaries of £150,000 and above.

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However, the KPMG findings suggested that other reasons were bolstering employers’ ability to attract or retain talent.

One tax director from a major travel and leisure group also told the survey: “A harsher economic reality makes people swallow more than they would otherwise. The lack of mobility in the job market also means that people are more likely to accept a higher rate. It doesn’t mean they are embracing it, but they are putting up with it for now.”

The survey report said: “Our respondents indicate that the impact of the 50 per cent tax rate on attracting senior talent has been less than thought in our previous research. However, senior executives still feel it damages the UK in other less direct ways, in combination with other elements of the tax regime. The higher rate of tax is seen as a stain on the UK’s image in difficult economic times.”

Chris Morgan, head of tax policy at KPMG in the UK, said: “Business is looking for reassurance that this top rate will indeed be only temporary and perhaps the chancellor will take the opportunity to do so in next week’s autumn statement.”

However, any move to abolish the 50p rate would raise further concerns about the pay inequality between the highest and lowest paid. This gap continued to widen between 2010 and 2011, according to the Office for National Statistics this week.

Data showed that wages for people in the highest paid 10 per cent of the UK rose by 1.8 per cent between 2010 and 2011, while pay for people in the lowest paid 10 per cent rose by only 0.1 per cent.