Lib Dems retract 'Tycoon Tax' claim
"Tycoon Tax raises FIVE times as much from the super-rich"
Liberal Democrat website, (until 27 March 2012)
The sensationally named but poorly-defined 'Tycoon Tax' was introduced during last Wednesday's budget among a host of other tax revisions.
Deputy Prime Minister Nick Clegg has championed the measure, claiming that it will target high-salaried individuals who use "an army of lawyers and accountants" to pick and choose tax payments to secure rates as low as 20 per cent. It will cap the amount that people can claim in tax reliefs, though the Director of the Insititute for Fiscal Studies has been among those who have doubted whether the measure can be effective.
The Chancellor introduced the tax last week by stating:
"To make sure that those on the highest income contribute a fair share I am introducing a new cap on those reliefs that are currently uncapped. From next year anyone seeking to claim more than £50,000 of these reliefs in any one year will have a cap set at 25 per cent of their income."
But will it raise the sums promised by the Lib Dems?
Looking at the splash page on its own, the statement is unclear as to what exactly the Tycoon Tax is being compared to in claiming that it will raise "FIVE times as much".
It is only by looking in more detail on the Lib Dem website that it is made clear that the party is comparing the tax take of the Tycoon Tax with the money lost through the reduction in the top rate of tax.
After we contacted the party for more details, the Liberal Democrats sent an email, pointing us to page 50 of the Budget Document and stated that: "The scorecard impact of the 50p reduction compared to measures on SDLT [stamp duty land tax] avoidance, tycoon tax etc are lines 3,4,5 and 6 on page 50 of the budget red book".
Looking at the Budget tables, we can see that in the first year of the new measures (2013/14), the combined changes to stamp duty land tax and the tycoon tax are expected to net the Treasury an extra £245 million, with £50 million expected to be lost through the change to the 45p rate of tax. The gain is approximately five times the loss.
However, the 'Tycoon Tax' only concerns line 4 of the above table, with its take in this financial year expected to be "negligible" by the OBR. While the Tycoon Tax is expected to raise larger sums in subsequent years (up to £490 million in 2014/15), it is actually the property tax changes that account for the lion's share of the Lib Dem sums.
When we got through to a Lib Dem spokesperson, he told us of the claim: "I have to admit it was slightly incorrectly worded".
Following our conversation, the splash page was taken down. But we still wanted to know where the facts came from. A budget-day email from Nick Clegg to party members shed more light on the issue. It says:
"The Tycoon Tax, an increase in stamp duty for high value properties and other new taxes on wealth will raise five times as much as the 50p tax rate".
In this light the claim can be substantiated, although it is worth adding that the comparison is with the reduction in revenue caused by the change to the 50p tax rate, rather than the total sum raised by it.
However neither claim is specific about what period is being referenced.
As the OBR table shows, any number of time-frames could be used to calculate the relative gains and losses to the Government. Taking only next year, the 'wealth taxes' do raise five times as much as the 50p change loses, however a negligible amount of this is due to the Tycoon Tax.
Meanwhile, taking the changes across a four year period gives a figure still greater than the 'five times' claim.
The Lib Dems did concede however that the Tycoon Tax alone only makes three times more than the losses in additional rate income tax revenue. This suggests that the statement could be based on the longer-term projection since this shows the Tycoon Tax alone raising £1.03 billion over four years compared to a £360 million loss to the 50p change.
This is probably why the splash page was removed - it was a misleading simplification of a previous statement.
The original assertion, coming from Nick Clegg on Budget day, was representative of the projected situation in the first year of the changes. Combining the three measures aimed at avoidance and the super-rich, the taxes receipts are predicted to eclipse the losses made in removing the 50p high-earners rate.
However, in shortening the fact for the website splash the writer removed a crucial part of the claim. Full Fact is pleased that the party took the page down after their attention was drawn to the problem, however whether this alone is enought to rectify the harm caused to visitors who would have seen the original splash is another question.