14 April 2022
It’s fair to say the Chancellor’s announcement of his grand Tax Plan in the Spring Statement was met with a nonchalant shrug of the shoulders by many. Early heckling of 'is that it?' following his announcement of measures of support in response to the cost of living crisis broadly set the tone.
The Chancellor may feel he is up against the ropes following recent scrutiny, but he could yet come out swinging with big tax policy ideas to try and silence his critics. One high-stakes policy measure which refuses to go away is a wealth tax.
In recent research by Arun Advani and Andy Summers published by the Institute of Fiscal Studies (IFS), Measuring and Taxing Top Incomes and Wealth, it is put forward once again that a one-off wealth tax remains a more 'efficient and equitable' option than any alternative measure to raise substantial UK tax revenues in the short term. Those familiar with the proposals of the Wealth Tax Commission may be unsurprised by the conclusions as Advani and Summers were commissioners of that group’s report on the subject. It is estimated that a one-off 5 per cent wealth tax on individuals with net assets worth more than £2m could raise more than £80bn for the Treasury.
The report goes further and highlights that £10bn of additional UK tax revenues could be generated each year if an annual wealth tax of 1.12 per cent was introduced on individuals with assets of at least £10m. Similarly, if an annual wealth tax was applied to individuals with assets of at least £5 million, it is estimated that the rate of tax would need to be 0.9 per cent to generate £10bn of additional tax revenues.
A precedent for an annual wealth tax may be set across the Atlantic with Joe Biden looking to push through his 'billionaires’ tax' proposal: a minimum federal tax rate of 20 per cent on individuals with assets of $100m or more. Whilst it appears the measure will struggle to obtain approval from Congress, polling data in the US suggests nearly two-thirds of Americans would support such a tax.
In July 2020, the Chancellor stated that he did not believe that 'now is the time or ever would be the time for a wealth tax'. However, the sands of time and the Chancellor’s political fortunes have shifted in the meantime. With arguably little to lose, perhaps the ultimate rebuttal the Chancellor could make to some of the criticisms targeted at him personally would be to announce a review of the wealth tax proposals.