Higher income tax rate cut in Wales 'would raise money'

Reducing the higher rate of income tax in Wales would raise additional revenue by attracting high earners, according to research by Cardiff Business School.

The report said cutting the higher rate from 40% to 30% would bring in about £500m extra a year after 10 years.

The higher rate is currently paid on annual taxable income of between £43,001 and £150,000.

Control over income tax is due to be split between UK and Welsh ministers, once an agreement can be reached.

The report, by Prof James Foreman-Peck and Dr Peng Zhou, assumed no change in England's tax rates.

Although they predicted tax income in Wales could fall in the first three years after a cut, the authors said receipts should rise in the longer term as high earners find it worthwhile to move from England.

'Reinvigorate'

"The encouragement to some households to immigrate, increasing Welsh taxable income, is greater than the revenue lost from the reduction in the rate", the report said.

For the top earners with income of more than £150,000 a year - about one in 100 UK residents - a cut in the additional 45% rate should also boost tax income in Wales, it added.

But the report said cutting the basic 20% rate would not boost migration sufficiently to make up for the lost revenue from existing taxpayers in Wales.

Welsh Conservative leader Andrew RT Davies has said he would like to see a 5p cut in the higher 40% rate of tax and a 2p cut in the basic 20% rate, although the party's manifesto for May's assembly election did not include these figures.

He said this research "reignites the debate about tax devolution", adding: "A Welsh Government with the courage to cut income tax rates could reinvigorate the Welsh economy, whist offering welcome support to hardworking families."