Report proposes 5% UK wealth tax to offset pandemic costs
A report from Britain's Wealth Tax Commission, the London School of Economics and Warwick University has found that the introduction of a one-off wealth tax of 5% would offset some of the costs of the covid-19 pandemic, raising £260bn for the government.
The report envisages that the wealth tax would apply to all assets worth a net £500,000, including property, and would affect around 8 million people in Britain.
Those to whom the tax would apply could pay in five equal installments over five years, the report suggests.
The 1% above £500k as a one-off tax is an interesting concept which would certainly raise a lot of money and lessen the need to significantly reform current taxes."
James Ward, head of the Private Client team at Kingsley Napley LLP, commented: "A direct tax simply on existing wealth has never existed in the UK although stamp duty, inheritance tax and other taxes are, of course, effectively 'wealth' taxes."
"The 1% above £500k as a one-off tax is an interesting concept which would certainly raise a lot of money and lessen the need to significantly reform current taxes," he said.
"However, a government would have to be exceptionally brave politically to consider introducing such a tax - even on the back of the unprecedented and costly Coronavirus situation which we all understand needs to be paid for."
Chris Groves, partner in Withers' private client and tax team, argued a wealth tax is "about a perception of fairness": "Fundamentally, a wealth tax isn't about generating government revenue, it's about the perception of fairness."
Groves saidL "Covid-19 has deeply impacted the national finances and we want to know how we'll pay for it, and who will shoulder the burden. But looking at long-term tax experiments in other countries, such as France, shows that a wealth tax doesn't contribute huge sums - €2bn in 2019, out of a total €1,000bn tax take. That's 0.2%, or less than one week of paying for the UK's furlough bill."
"The Wealth Tax Commission will have considered inheritance tax, capital gains, property and other forms of taxing wealth, but if fairness and simplicity are important factors then arguably the answer is just to increase council tax, which is already assessed according to the demographics of wealth."
Groves said the notion of such a tax as a solution was "laughable".
"The pandemic was a sudden shock to our economic system, but the idea that we will simply be able to lay the furlough bill at the door of a few rich individuals and then life will resume as normal, without that having any effect on economic activity, is laughable," he said.
Others also viewed the idea with scepticism, if not outright scorn. Neil Jones, tax and estate planning specialist, Canada Life commented on the proposals for a UK wealth tax: "By any measure the UK is already one of the highest tax paying nations in the G7. As welcome as a debate on the pros and cons of introducing a one-off wealth tax may be, many countries across the world have tried and failed to implement similar moves.
"It's thought of as regressive rather than progressive by the electorate, and ultimately as any change would be a question for the political elite, is likely to be as popular as turkeys voting for Christmas.
"Rather than focus on tax raising measures, we should be looking at growing our way out of the hangover from the pandemic, through job creation and security, not a one-off tax on wealth."
Subscribe to International Investment's free daily newsletter
More on Taxation
Most read
