Monday, January 18, 2010

Bloomberg: Tax Hike Makes London Most Expensive (time to move to Singapore)

http://mobile.bloomberg.com/apps/news?pid=2065101&sid=axhnd2zRRDrc

***New Yorkers: check out the marginal tax rates***
Time to move to Sinagpore!
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Tax Makes London Most Expensive (Update1)

By Gavin Finch

Jan. 14 (Bloomberg) -- The U.K. government’s decision to raise the top rate of income tax will leave residents earning more than 1 million pounds ($1.6 million) a year worse off than they would be in any of the world’s other major financial centers.

“People feel let down,” Nick Bacon , a London-based financial services tax partner at accounting firm KPMG , said in a telephone interview. “They thought that the U.K. could always be relied on as being tax-friendly.”

The U.K. government will raise the top rate of income tax to 50 percent in April, making London more expensive for residents earning 1 million pounds a year than New York or Hong Kong, according to KPMG estimates...the top tax rate will rise from 40 to 50 percent on incomes of more than 150,000 pounds. That will cost anyone earning 1 million pounds a year about 87,588 pounds more in tax, according to KPMG’s estimates.

“Talent is mobile,” John Varley , chief executive officer of Barclays Plc, the U.K.’s second-biggest bank, told the New Statesman magazine last week...And it will not be good for the economy if talented people conclude they’re better located in Madrid, New York, or Singapore.”

U.K. Most Expensive

The income tax rise will force U.K.-residents earning 1 million pounds to pay more in tax than colleagues in Frankfurt, Hong Kong, Mumbai, New York, Paris, Singapore, Tokyo or Zurich, the KPMG figures showed. The previous year, Londoners would have paid less in tax than all of those cities except for Hong Kong, Singapore or Tokyo.

“The U.K. is an international financial center and those from overseas provide tens of thousands of British jobs and pay billions of pounds in tax,” said British Bankers’ Association Chief Executive Officer Angela Knight on Jan. 8. “The government must not take steps that are detrimental to this business and the U.K. economy.”

Mercer Study

...(the) study of 143 cities takes into account the prices of more than 200 items, including housing, food, transportation and entertainment.

KPMG’s calculations are based on the assumption that the employee is single, has no children and earns a salary of 1 million pounds a year. Tax and social security payments are calculated from Jan. 1 to Dec. 31, 2010.

As of April 1, 2010
City Income Tax Social Security Total
London 477,519 13,759 491,278
Frankfurt 476,469 10,339 486,808
Paris 350,786 110,342 461,128
Mumbai 338,050 120,000 458,050
New York 414,250 18,520 432,770
Zurich 363,694 54,492 418,186
Tokyo 349,655 12,260 361,915
Singapore 190,366 1,180 191,546
Hong Kong 149,859 940 150,799

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net

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