It is only on rare occasions that I agree with Sir Ed Troup, the former first secretary of HM Revenue & Customs. He arrived at HMRC from the private sector, and I was never quite convinced that he did not serve that sector's interest well whilst in office, but the FT reports that yesterday he:
told MPs looking into the pros and cons of a wealth tax that the “defects” of the existing tax system needed to be tackled first.
And I agree with him.
As the FT added:
Members of the Treasury select committee are investigating which tax changes should be made as a result of the economic fallout from the coronavirus pandemic. “We have a lot of taxes on various aspects of capital . . . none of them work properly,” said Sir Edward on Wednesday, citing capital gains, inheritance and council taxes as examples. “It’s always better to try and fix what you’ve got than to pile something else on top of it.”
This was the major message of my work on Tax After Coronavirus (TACs) that I undertook earlier this year, the evidence of which I have submitted to the Committee, and which can be read in these links:
- There is significant room for wealth taxation in the UK
- The UK could tax wealth more
- The relationship between income, wealth and tax
- The TACS approach to wealth taxation
- Reforming taxes on wealth by equalising capital gains and income tax rates
- The need for an investment income surcharge
- Capping total ISA contributions
- Abolishing the personal savings tax allowance
- Restricting pension tax relief
- Abolishing higher rate tax relief on gifts to charity
- Reforming council tax
My logic is simple. Whilst capital gains get favourable tax rates, savings get favourable tax rate, those able to save get significant tax reliefs and whilst there is no NIC equivalent charge on unearned income then the scope for raising the tax rates on wealth by increasing the tax due on the returns from it is much higher than it is from any wealth tax.
I have no desire to see any further increases in wealth inequality in the UK.
Right now I have no desire for an overall increase in tax take in the UK, because that would be economically counter-productive.
But I do have the desire to see income and wealth redistributed and Ed Troup is right to say that the best way to achieve this is to tax the income and gains from wealth more.
Sunak should be announcing such a programme next week, with all the proceeds being redistributed and not retained.
Will he do that? I am sure he will not. But he's not good at doing the right thing for this country.