The public spending requirement to deal with the consequences of COVID-19 has been without precedent and there is debate about how to rebuild public finances. The pandemic has exposed ever widening inequalities in society and calls for a tax on wealth are being pushed up the political agenda. An initial paper about whether to introduce a wealth tax has recently been published.
What is a wealth tax?
Wealth taxes have been used in many countries in the past and was considered in the UK during the 1970’s but never implemented.
A wealth tax could be charged on the total value of assets owned by individuals. It could be payable annually, based on a percentage of total wealth.
How would this work?
There are serious questions raised by the concept; such as would it be fair, and would it be accepted by the public? Other considerations include who would be liable – individuals, married couples or households? Would it take account of your residence position or be taxable on all those with assets in the UK?
Then there is the question of what counts as wealth? Would property and pensions be included? Would this cause a problem as they might be high in value but individuals may not have cash with which to pay tax on them. How would it be administered efficiently and how can a fair value be given to some assets?
In an age with increasing calls for tax simplification, it is difficult to perceive how a wealth tax would interact with other taxes including those of the devolved administrations.
The answers to the above questions will hopefully be made clear once the final report is issued and we wait to see what the government decide.
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