In April, the United Kingdom raised its top income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. rate from 40% to 50%, imposed on amounts over £150,000 (approximately $245,000), jumping past Italy, Germany, Spain, and France. At the same time, Spain has cut their top tax rate on “foreign executives” to 24%, leading to a flurry of well-known Britons reclassifying themselves as Spanish executives.
From NCPA and the Weekly Standard:
- [N]ot only did [Spain] create a massive loophole, they backdated it to 2003, which was, coincidentally, the year David Beckham left Manchester United to join Real Madrid.
- Beckham became the first man in Spain to acquire “foreign executive” status; the tax break came to be known as “the Beckham Law.”
- And it has become an almost insurmountable advantage for Spanish soccer teams.
- Deloitte Sports Business Group estimates that between the falling pound, the higher British tax rate, and the Spanish tax break, U.K. clubs would have to pay 70 percent more in order to match a player’s take-home pay in Spain.
Countries and states should always keep other jurisdictions in mind when setting tax rates. If you raise the rates to an uncompetitive level, don’t be surprised if you become uncompetitive.
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