James Saunders: Ignore the naysayers: Britain's rich likely to stay despite tax hike

The top rate of income tax will be raised to 50 per cent for those on more than 150,000 a year. That's on top of a 50 per cent tax on bankers' bonuses, a rise in stamp duty for properties over 1 million and an existing crackdown on "non-doms".

Debate has largely focused on whether this fiscal footering is driven by ideology or expediency. What's clear is that the top 2 per cent of earners in the UK are being asked to bear more of the tax-raising burden than they were two years ago. For many, this is the very definition of fair taxation. Those with broadest shoulders should carry the heaviest loads. For others, this is "soaking the rich" – alienating the very wealth creators on whose talents the economy will be rebuilt.

Will these tax measures force the best and brightest to flee from these shores in their droves? I believe that this is unlikely. It is important to assess the effect of the entire tax system on the wealthy and their businesses, rather than concentrate on headline rates and rises. Let's use the example of two of the popular pantomime villains of our time – private equity executives and hedge fund managers. When their investments do well, the tax system allows them to treat their profits as a capital gain rather than income. No 50per cent rates here. In European terms, the UK is the dominant player in both private equity and hedge fund management. These industries stay here because they have certainty over the tax treatment, if not the rates.

As well as a relatively predictable tax regime (although there is room for improvement), there are other good reasons why the vast majority of high earners will still choose to call the UK home. First, the 50per cent rate of income tax will not last forever. The indications are that the rate will be reduced as soon as the government of the day feels it is economically possible to do so. The tax on bankers' bonuses is a levy for one year only. Labour and the Conservatives have also acknowledged that spending reductions are the most effective way of tackling the deficit, rather than tax rises, even though they may quibble on the pace of change. This is all reassuring to a high earner.

Second, where else would high earners go? Tougher tax regimes across Europe are inevitable, as the financial crisis has affected all countries. Even in Switzerland, where a few British high earners have relocated, some cantons are toughening up their tax regimes by removing loopholes. Also, let's see ourselves as others see us. As a place to do business, the UK is a good location. The World Bank Doing Business 2010 report ranks the UK as the fifth best country in the world, behind the US, Hong Kong, New Zealand and Singapore on a range of measures, of which paying taxes is only one.

Finally, paying taxes at a high rate encourages people to seek ways of reducing their tax bill. This can be achieved by pension contributions, earnings limits, gift aid and investing in tax efficient assets. For all these reasons, the migration of high earners is unlikely to happen because the top rate of tax is 50per cent. The watching brief is to ensure that the cost of compliance and the threat of higher taxes does not deter foreign high earners from coming to the UK.

• James Saunders is a partner and head of the energy and utilities group at Shepherd & Wedderburn LLP