Dispute over MP’s claim that government is forcing wealthy to pay ‘fair share’ of tax

Northern Isles MP Alistair Carmichael has come under criticism after claiming the Tory-Lib Dem coalition is making sure rich people pay their “fair share” of tax.

He pointed to new HMRC figures published this week, revealing that those with assets in excess of £20 million paid an extra £220 million in tax in 2012/13.

Mr Carmichael said the increase meant the wealthiest one per cent of people in the UK now paid 26.5 per cent of all income tax receipts.

But Highlands and Islands list MSP Jean Urquhart said the divide between rich and poor continued to widen. A recent UN report showed the UK was heading towards being the most unequal society in the world.

Mr Carmichael said HMRC’s figures showed that coalition tax reforms meant someone earning £1 million a year would pay £381,000 more over a five-year period than under the last Labour government.

He said one reason for that was that many high earners took their income in, for example, share options as well as salary. Such income is liable for capital gains tax (CGT) rather than income tax.

Despite resistance from the Conservatives, the Lib Dems secured an increase in CGT from 18 per cent to 28 per cent in the first coalition budget, Mr Carmichael said.

“There is a lazily accepted version of events which says that the richest do not pay their fair share,” he said. “I can understand why people may say this, but this report from HMRC shows that the money taken in taxes as a whole from high earners has gone up.

“Obviously there is still some way to go but I am pleased that change is now going in the right direction. The work being done to simplify the tax system, closing loopholes and tackling tax avoidance and evasion is now producing results.”

Mr Carmichael said it was also worth remembering that the 45 per cent top rate of income tax was “higher than it was throughout all but the last six weeks of the 13 years that Labour was in government”.

His party is “working hard in government to make the tax system fairer”, the MP – Lib Dem chief whip in the coalition – claimed.

“I think it is right that in these difficult times the wealthy should also be helping to lessen the tax burden of ordinary people. This news shows that we are making even more progress in delivering on our manifesto pledge by helping people keep more of the money they earn.”

However, opposition parties point out that chancellor George Osborne’s decision to lower the top rate of income tax from 50p to 45p would make millionaires an average of £100,000 a year better off this year. Institute for Fiscal Studies figures also suggest that the average family is £891 a year worse off due to tax and benefit changes since 2010.

Ms Urquhart pointed out that Britain is the second most unequal country in the world and was “rapidly moving into first place”.

“A lot of that has to do with wages, with welfare and with tax,” she said, “and we need a government, coalition or not, which is going to look fairly at that and start recognising that huge amounts of the current problems we have are because we are so unequal. That’s what’s wrong and needs to be tackled.”

Unison branch representative Brian Smith also hit out at Mr Carmichael’s claims. He said government austerity measures were hitting the poor and disabled hardest and allowing the rich to get richer.

“I met Alistair at Sumburgh Airport at the end of 2012, and he told me that the economy was performing well,” he said. “That’s a measure of how deluded he has become about the Tories’ austerity programme, which, contrary to what he says, penalises the poor and disabled while the rich are getting better-off.

“There’s no doubt that the electorate will remember his volte-face when he faces it again.”