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Calls for ‘wealth tax’ to help recovery from Covid

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Written by: Emma Lunn
09/12/2020
The Wealth Tax Commission is urging the government to launch a one-off wealth tax on millionaire households to raise up to £260bn towards the UK’s economic recovery.

The commission is made up of a group of leading tax experts and economists brought together by the London School of Economics and Warwick University.

It says a ‘levy on assets’ targeting the richest in society would be the fairest and most efficient way to raise taxes to fund the UK’s recovery from the pandemic.

The Wealth Tax Commission has suggested a 1% levy on the value of a household’s assets above £1m. It said this could raise £260bn over five years and would be preferable to raising income tax rates for all workers – the same amount could be raised by adding 9p to the basic rate of income tax for five years.

Under the commission’s proposals, the tax would apply to a person’s total wealth, including properties, pension pots, business and financial wealth. Debts, including mortgages, would be deducted. It says at a threshold of £1m, the wealth tax would affect 6% of the adult population.

Arun Advani, an assistant professor at the University of Warwick and a commissioner on the Wealth Tax Commission, said: “We’re often told that the only way to raise serious tax revenue is from income tax, national insurance contributions, or VAT. This simply isn’t the case, so it is a political choice where to get the money from, if and when there are tax rises.”

The UK’s budget deficit is set to hit almost £400bn this year due to the pandemic. Chancellor Rishi Sunak is looking at options to raise taxes from next year in order to cut the deficit.

Neil Jones, tax and estate planning specialist, said: “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.”

Richard Jameson, partner at accountancy firm Saffery Champness, said: “The future of tax is up for debate right now and solutions are needed. The Treasury Committee is reviewing tax after coronavirus and the OTS recently reporting on both capital gains tax and inheritance tax. It seems clear some change is on the horizon, perhaps starting in the 2021 budget. But if it’s to be a wealth tax, and if it’s to achieve the primary goal of helping balance the books, then it must be fair, proportionate and recognise the importance of wealth creation to economic growth.”

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