Incentives matter: tax file

The incentive effects of taxes are well appreciated by most people, if not by governments. The following comes from a piece, Hundreds of bosses flee UK over 50% tax by Robert Watts and Maurice Chittenden, in The Sunday Times, December 13, 2009:

Britain’s financiers and entrepreneurs are quitting the UK at a rate of 10 a week to avoid Labour’s new 50% taxes.

The burgeoning exodus threatens to deepen a £178 billion black hole in the public finances and leave middle-class voters with higher taxes for years to come, figures obtained from Companies House reveal.

The number of directors of British businesses registered as living in the low-tax centres of Jersey, Guernsey or the Isle of Man has risen by almost 500 to 6,729 in the past 12 months.

The British Virgin Islands is also a popular destination, with 615 directors of UK companies now based in the Caribbean tax haven — an 18% rise on a year ago.

Those known to be fleeing the UK include hedge fund managers, property tycoons, bankers and people who made their money setting up companies organising private healthcare, call centres and luxury holidays.

May be not all governments ignore the incentive effects of taxes, some try to take advantage of them. The article notes that a new marketing brochure published by the island of Jersey’s authorities promises “in Jersey, keep more of what you earn”.