Researchers from Warwick University and the London School of Economics (LSE) analysed HMRC tax returns of higher earners and found that the average person with £10m in total remuneration had an effective tax rate of just 21 per cent – less than someone on median earnings of £30,000.
And a tenth of people receiving more than £1m paid a lower rate than someone earning just £15,000.
The very rich are able to – entirely legally – reduce their taxes by structuring their affairs to take their remuneration as capital gains and corporate dividends. These are forms of remuneration that attract a significantly lower tax rate than income tax.
“Instead of asking, can the rich pay more?, a better question may be: who amongst the rich is not paying their fair share?,” they write.
Other research this year by the Warwick and LSE authors shows that, if capital gains are included, the total remuneration share of the top 1 per cent has been growing faster than previously thought over the past decade, rising from 15 per cent to 17 per cent.
Some tax experts argue that attempts to increase taxes on the very wealthy, regardless of the fairness question, are unlikely to raise much additional income, partly because people would move their assets offshore in response.
Opponents of higher tax rates on the wealthiest point out that an estimated 30 per cent of total UK income tax was paid by the top 1 per cent in 2019-20, up from 25 per cent before the 2008-09 financial crisis, while their share of income has been constant at around 14 per cent. Yet such calculations do not include capital gains.