Proposed wealth tax an 'exceptional' crisis response
By Nicola Laver
A so-called wealth tax on UK individuals has been proposed by the Wealth Tax Commission as a crisis response to covid-19
A so-called wealth tax on UK individuals has been proposed by the Wealth Tax Commission in response to the covid-19 crisis.
This comes even though the chancellor Rishi Sunak said in July 2020 that he did not believe there would ever be a time for a ‘wealth tax’.
However, in his foreword to the Commission’s final report, published today, Lord Gus O’Donnell said: “The predicted deficit as a result of covid-19 has doubled since [July], and is now expected to reach 19 per cent of GDP, the highest peacetime figure ever.”
He also pointed out that no one in the UK had seriously considered a wealth tax for nearly 50 years, and “the evidence base was thin”.
The Commission said public attitudes show a “clear desire for wealth to be taxed more, relative to labour”.
It therefore recommended a one-off post-covid-19 wealth tax, but said it should not be retrospective.
It also made clear an annual wealth tax was “a non-starter”.
Such a one-off tax payable on all individual net wealth above £500,000 and charged at 1 per cent a year for five years would, the Commission said, raise £260 billion.
If the threshold was set at £2m it would raise £80 billion.
The Commission’s report defines a wealth tax as “a broad-based tax on the ownership of net wealth” – a tax on most or all types of asset, not only a specific type.
Valuation of assets should, it suggested, be based on their open market value; and payments could be deferred by individuals who were asset rich but cash poor.
Responding to the proposals, James Ward, head private client Kingsley Napley, said: "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.”
He described the 1 per cent above £500,000 as a one-off tax as “an interesting concept which would certainly raise a lot of money and lessen the need to significantly reform current taxes”.
“However”, he added, “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.”
“In my view, this is unlikely to be introduced by a conservative government, but perhaps the threat of a new wealth tax will help to sell other measures”, he added.
He expressed the fear that the mere suggestion of a wealth tax “will encourage capital flight out of the UK” which, he said, is not what we need in the current climate.