U.K. Urged to Levy $350 Billion Wealth Tax to Fund Pandemic

(Bloomberg) -- A one-off 5% tax on wealth in the U.K. could raise more than 260 billion pounds ($348 billion) to help fix the coronavirus-hit public finances, according to a panel of experts.

In a report published Wednesday, the independent Wealth Tax Commission called for a charge of 1% a year for five years on individual assets above 500,000 pounds. About 8 million residents would be affected.

The debate over wealth taxes has gained momentum as the government considers how to address its fiscal situation, with the Office for Budget Responsibility predicting borrowing is on course to reach almost 400 billion pounds in the current fiscal year. At almost a fifth of the economy, that’s the largest deficit in peacetime history.

Supporters say a wealth tax would target those with the broadest shoulders, and polls show there is public sympathy for the idea. But critics say it would be hard to administer, deter entrepreneurs and fail to raise as much as advocates reckon.

The Wealth Tax Commission, led by researchers from the University of Warwick and the London School of Economics, said its estimates are based on total wealth including pensions and property, minus mortgages and other debts, and after splitting the value of shared assets such as a jointly owned family home.

Fair, Efficient

Setting the threshold at 2 million pounds per individual would raise 80 billion pounds over five years and affect 626,000 people.

The commission, which is made up of academics, policy makers and tax practitioners, said raising equivalent amounts elsewhere would require a broad-based raid on incomes and consumers by hiking income tax, national insurance contributions or value-added tax.

A well-designed wealth tax would be “fairer and more economically efficient than alternative tax rises,” it said. “It could be targeted at those with the most ability to pay based on their wealth and would be very difficult to avoid. The administrative costs on taxpayers and the government would be small relative to the revenue raised.”

With public services bearing the brunt of the austerity following the financial crisis, Chancellor of the Exchequer Rishi Sunak has hinted that tax increases are coming once the economy has recovered from the pandemic. He has given little away, however, on which taxes might be targeted.

Responding to the WTC report, the Treasury said steps had already been taken to ensure the wealthy “pay their fair share” by reforming the taxation of dividends, pensions and business disposals.

“Our priority right now is supporting jobs and the economy, and believe that getting people back to work, encouraging and incentivising businesses to take on new employees and new apprenticeships, ultimately creates the wealth that funds our public services,” a spokesperson said. “We’re committed to a fair and efficient tax system in which those with the most contribute the most.”

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