A one-off wealth tax on millionaire couples paid at 1% a year for five years would raise £260 billion, according to the final report of the Wealth Tax Commission.
The Commission recommends that if the government chooses to raise taxes as part of its response to the Covid-19 crisis, it should implement a one-off wealth tax in preference to increasing taxes on work or spending.
The report follows intensive research by a team of over fifty international experts on tax policy and practice. The three Commissioners are academics from the London School of Economics and Political Science (LSE) and the University of Warwick, and a leading barrister with long experience of advising High Net Worth Individuals. Under the design recommended by the Commission, a one-off wealth tax would:
- Be paid by any UK resident (including ‘non-doms’ and recent emigrants) with personal wealth above a set threshold.
- Include all assets such as main homes and pension pots, as well as business and financial wealth, but minus any debts such as mortgages.
- Be payable in instalments over five years.
The Commission concludes that a one-off wealth tax would be:
- Fair. Wealth provides opportunity, security and spending power. Those with the most wealth have the ‘broadest shoulders’ to afford an additional contribution to society in times of crisis.
- Efficient. Unlike taxes on work or spending, a one-off wealth tax would not discourage economic activity. The administrative costs would also be small as a proportion of the revenue raised.
- Very difficult to avoid. A one-off wealth tax could not be avoided by emigrating or moving money offshore. In fact, if well designed, it would be very difficult to avoid the tax legally.
The report does not say when the tax should be implemented or recommend specific tax rates or thresholds but instead provides a range of options.
As two examples:
- At a threshold of £1 million per household (assuming two individuals with £500,000 each) and a rate of 1% per year on wealth above the threshold, a one-off wealth tax would raise £260 billion over five years after administration costs. This is equivalent to raising VAT by 6p or the basic rate of income tax by 9p for the same period.
- At a threshold of £4 million per household (assuming two individuals with £2 million each) and a rate of 1% per year on wealth above the threshold, a one-off wealth tax would raise £80 billion over five years after administration costs.
Alongside the report, the Wealth Tax Commission has launched an interactive website (taxsimulator.ukwealth.tax) that allows members of the public to model their own revenue-raising options, and see how much they would pay under different options.
Dr Arun Advani, Assistant Professor at the University of Warwick and Visiting Fellow at LSE's International Inequalities Institute, 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.”
Emma Chamberlain, barrister at Pump Court Tax Chambers and Visiting Professor in Practice at LSE's International Inequalities Institute, said: “People sometimes say the super-rich won’t pay. My experience is they are happy to pay, as long as the tax is simple to operate, affordable and they don’t feel they aren’t being singled out with penal rates. The trouble is that our current way of taxing the wealthy is far too complicated leading to avoidance and resentment. We need a better way forward.”
Dr Andy Summers, Associate Professor at LSE’s Department of Law and Associate Member of the International Inequalities Institute, said: “Our report provides the first serious look at proposals for a UK wealth tax in nearly half a century. A one-off wealth tax would work, raise significant revenue, and be fairer and more efficient than the alternatives.”
The final report of the Wealth Tax Commission, A wealth tax for the UK, by Dr Arun Advani (University of Warwick), Emma Chamberlain (barrister) and Dr Andy Summers (LSE) is published on the Wealth Tax Commission website: www.wealthtaxcommission.uk
The report will be launched with an online public event on Wednesday 9 December at 4pm.