Vince Cable, the Business Secretary for the coalition government and member of the Liberal Democrat Party, has indicated that complex negotiations over the future of the 50p tax rate are taking place.
The 50p tax rate, which was introduced by the Labour government, has been previously criticised by the Conservatives and numerous businesses as being damaging to the economy.
Speaking for the Lib Dems, Vince Cable suggested that they were not ‘wedded to the 50p tax rate,’ but he did indicate that an alternative ‘wealth tax’ would need to be considered if it is to be scrapped.
The business secretary added that the principle of taxing wealth should be upheld, particularly in the current economic climate.
One option being considered as a replacement is a ‘mansion tax’. This would place an additional tax burden on the most expensive homes in the country and could potentially be run through both local government and central government.
Mr Cable pointed out that there are many homes in the south of England that generate large property gains for their owners, many of whom are from overseas. He pointed out that some of these multi million pound homes are eligible to pay the same council tax as a three bedroom semi-detached house.
However, Mr Cable argued that the Lib Dems current priority was raising the income tax threshold to £10,000.
The Labour Leader, Ed Milliband, argued that the mansion tax should be considered, but not necessarily as a replacement to the 50p tax rate. He warned it against using it as a way of cutting taxes on high earners. Ed Balls from the Labour party questioned whether the government should be making cutting taxes for people with an income of over £150,000 a priority.
In the meantime, the Chancellor has asked the HM Revenues and Customs to review the amount of tax generated from the 50p tax rate. It is suggested that people are taking avoidance measures and limiting the revenue from this tax.