Britain Set To Introduce “The Tycoon Tax”

A study conducted by Her Majesty’s Revenue concluded that a vast majority of the wealthiest citizens in Great Britain pay either little or no income tax. What surprised even members of Her Majesty’s Treasury was that the tax avoidance schemes taken to reduce their overall income tax were within the tax code. All of the avoidance schemes were legal. For example, the study reported that the owners of many businesses were able to reduce their income tax bill by half by writing off their business losses against their own personal income tax return. 

The study prompted Her Majesty’s Chancellor George Osborne to act; however, the solution he proposed as ruffled the feathers of some members of Cabinet. Osborne proposed that Great Britain should adopt a “Tycoon Tax” or, as it is more commonly known in the United Sates, an alternative minimum tax. The tax would impose a 33% tax on the wealthiest citizens. In addition, Britons will only be able to reduce their income tax bill by 25% or £50,000. A citizen will be able to take the option that provides more tax relief.

Some have argued that Osborne’s proposal will hurt charities and charitable giving. The Chancellor insists that this is not the case, and that most of the charitable gifts are only used as a part of a tax avoidance scheme. For example, citizens were donating money to charities that they established and operated. Osborne also plans to reduce the income tax on citizens who could use the relief. 

See Robert Winnett and James Kirkup, George Osborne: I’m Going After the Wealthy Tax Dodgers, The Telegraph, Apr. 9, 2012.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.