I was sent a press release saying this yesterday:
A survey of 885 UK investors has revealed their sentiment towards the UK government's proposed “wealth tax”. It found:
- 52% are against the introduction of a wealth tax in the UK
- This figure rises to 60% for people with investment portfolios worth over £50,000
- 55% feel it would dry up overseas investment into Britain
- 35% would relocate investments to non-UK assets if the tax was brought in
The majority of UK investors are opposed to the UK government's proposed introduction of a wealth tax, according to new research by Butterfield Mortgages Limited (BML).
First, I was surprised at how low the rate of opposition was.
Second, I was surprised that those rose only a little amongst people with supposed ‘portfolios'.
Third, I wonder why people think this will impact those investing in the UK from overseas, because it is not clear how it might?
But fourth, I was intrigued by the last comment. Are 35% of respondents willing to tax evade to prevent their having to pay this tax?
And are they really now so naive that they do not appreciate that overseas holdings now have to be reported to the UK government?
It's very strange if they do think they could get away with doing this.
Very clearly the government has a great deal more to do to educate people on the current dangers of investing outside the UK without declaring doing so.
But most importantly, the implication that people think evasion is still possible and might therefore be trying it is present in these answers, and that suggests more action on data supplied via automatic information exchange is still required.
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Sorry to be pedantic, but do you not mean 35% are willing to avoid tax -as evasion is illegal action to not pay tax legally due, whereas avoidance may be legal – though of course reprehensible behaviour ?
No, I think they are evading
Moving assets outside the UK would not avoid a wealth tax on UK resident people
UK taxes residents on their foreign income, not on foreign assets.
So by moving your assets out of the UK, and thanks to the taxation treaties that currently exist, the UK would not be able to tax your non UK wealth.
It would be avoiding, not evading. There is no legal grey area in this.
It’s a totally moot point though. Every time another country introduced a wealth tax it was a disaster and quickly reversed. Just look at the recent French attempt. There is no chance any sensible government would introduce one as it is the best way to encourage disinvestment, when especially at the moment governments are trying their hardest to encourage it.
The UK does already tax worldwide wealth using inheritance tax
You are wrong, therefore
The UK would have the absolute right to tax aUK resident person’s worldwide wealth, and no doubt would seek to do so if it had a wealth tax
UK IHT is not an annual wealth tax, for a start. Plus it is subject to double taxation treaties.
Those same tax treaties would mean that a wealth tax would be subject to them too.
Either way, I’m not sure what point you are trying to make. If UK residents shifting their assets abroad would still be subject to UK tax, how is that evasion? At most, it would be avoidance.
Nor does it make wealth taxes a good idea. They are just a really good way of getting rich, highly mobile people to leave a country and reduce investment into a country. All round they are just a terrible policy. The countries that do have them barely raise anything from them. France manages just over EUR 1bn a year, against total tax revenues of about EUR 1300bn. The evidence also shows that wealth taxes would have to be so high as to be confiscatory to have any effect on redistribution and inequality.
So basically, what’s the point?
Other than feeding the trope of envy and resentment that some people are richer than others, and it’s all so unfair.
If they are saying they will move assets abroad to avoid declaration that is evasion
Please note other comments as well. You have this wrong
And as for the virtue of wealth taxes, I have answered that question many times
If they are avoiding declaration then it would indeed be tax evasion.
But why do that and take the risk when you can take it offshore, pay tax in that country and enjoy the protections double taxation treaties offer you perfectly legally? Avoidance is legal.
This is why almost all current wealth taxes are taxes on fixed assets – housing specifically. You can’t move it, otherwise people probably would have.
I googled what else you have said about wealth taxes. You seem very pro them, or similarly massive tax rises on the rich. Even claiming they could raise £174bn a year. Which seems less than plausible considering every other country that has tried them raised a small fraction of that amount.
But more to the point, if we know wealth taxes don’t raise much money, and they do reduce investment and reduce GDP growth (as various studies have shown), and they would have to be huge to make any difference to inequality, why are you suggesting them?
Moreover, if you say MMT is true, and the government can just print money and spend it, not having to worry about taxes or debt, why bother with wealth taxes at all?
If your primary concern is inequality, why not just print £50k per person over the age of 18 and give it to them? That would immediately reduce the Gini coefficient a lot more than any wealth taxes, and you say that with MMT we don’t need those taxes and can just print the money. So why not?
You have not read very thoroughly then
I have actually said there are many other taxes that can work better
That, your error on tax bases and the nonsense you have just written on MMT all suggest you are wasting my time
Jim, the UK does charge tax on foreign assets held by UK residents (for example, if a UK resident realises gains, or if foreign assets form part of the estate on death) as well as on foreign income of UK residents.
But can you give us an example of a country to which a UK resident person could (to pick an example) transfer their bank account and thereby be protected from a new UK wealth tax under an applicable double tax treaty. Which jurisdiction, and which article of which treaty?
For the record, the UK has over 100 double tax treaties that apply to income tax and gains, but only 10 or so that apply to inheritance tax (including four from the days of estate duty). Why do you think any of these would apply to a wealth tax?
Have you read the report of the Wealth Tax Commission? Here it is: https://www.ukwealth.tax/s/A-Wealth-Tax-For-The-UK.pdf
They are explicit that their proposal is for a temporary tax for five years to raise revenue. If the plan is to raise more tax on wealth more generally, their first proposal would be to reform existing taxes on wealth, such as capital gains tax and inheritance tax (e.g. increase effective rates, and/or abolish or restrict exemptions and reliefs). And only then to consider a permanent annual wealth tax “if the aim [is] specifically to reduce inequality by redistributing wealth”.
There are plenty of objections that could be raised to an annual wealth tax, but a tax with a wide base and low rate with few exception should be “efficient” in economic terms, with little incentive to avoid it.
Thanks Andrew
Let’s be honest, we both know Jim was well out of his depth here. I tried IHT to see what the response was. I did not even try CGT. As a time waster I have no blocked him. But would you like me to give him the chance to reply?
I’d be interested to see what he has to say in his reply but it is your blog. I’m sure you know best 🙂
Last time research like this came out it showed majorities in favour of taxing income from wealth more highly. Not really the same thing.
Without seeing the actual survey questions and report, I wonder if the press release contains a glaring mistake.
It is an unexpected result as you say.
Either I or the respondents appear to be under a misapprehension here. I had understood that the proposed tax will be on the worldwide wealth of people resident in the UK. The fact that 55% think this will discourage foreign investment into the UK and 35% would be willing to relocate their investments abroad indicates that they understand that it will be a tax on the UK wealth of people worldwide. Which is it?
Given that the survey was organised by an organisation with the word “mortgages” in it indicates that when they say “investors” they really mean landlords.
Your initial understanding was right
Do you seriously think a Conservative government will introduce a wealth tax?
Who knows?
The Post-Covid world is going to be a radically different place
“The Post-Covid world is going to be a radically different place”
Sorry, but my advanced years tell me we will see very little difference. Division is the one to watch out for.
There are moments when the world changes
This is one of them
What do you think will be radically different ??.. will nightclubs remain shut?
same for football stadiums?, holiday destinations remain a no go? no one works in an office again??
Schools would be shut
“There are moments when the world changes
This is one of them”
Okay then, genuine request here, could you outline in a blog post how you personally think the world will change?
If you do, we can have a debate.
Jim
If you really can’t imagine it, I guess I am sorry
Richard
“Jim
If you really can’t imagine it, I guess I am sorry
Richard”
No, I honestly can’t see it.
People who can afford to can’t wait to go on holiday abroad, public transport is poorly supported and managed with a declining ridership, (buses especially)
Still no housing, industrial, health or education strategy, and non likely on the horizon.
Non existent political opposition.
Corruption and division.
As a little side note, I remember quite well when Labour came to power in 1997, yes, the economy had started to pick up before that, but between ’97 and roughly 2002, there were signs of optimism.
The clubs I used to frequent then were packed, employment seemed to be going in the right direction, there were many other little noticeable things.
I am no fan of Blair or Labour, but to me there WAS something.
As I stated before, things like Brexit, Covid etc… have created division, if unemployment does get as bad as you predict, who do you think will take the blame now there is no EU to bash?
I’ll tell you what, I’ll keep this blog post in mind (and in good faith) and we’ll revisit in 2022.
I confess that I have pretty much lost you there Jim
What the relevance of that is to this thread I am not sure
It was a response to your comment staying you think the post Covid world will be very different.
Ah yes…
And I disagree with your reply
But I also strongly suspect you seriously underestimate how long this will go on for and how radially it will reshape society
We have a very long way to go as yet
And no society comes out of such an event unchanged
“People unwilling to pay more tax” is hardly a compelling headline.
I don’t know what questions they were asked, but if this is about the report of the Wealth Tax Commission, charitably it suggests they do not understand the proposal is to levy a temporary five-year tax on the worldwide wealth of UK residents. So moving their wealth offshore will not help, unless they intend to deliberately fail to declare it (which would be tax evasion).
Perhaps they don’t understand that that UK residents are already taxed each year on their worldwide income and gains (including income and gains arising outside the UK, with some limited exceptions, such as the remittance basis to those who qualify and claim it) and that persons domiciled or deemed domiciled in the UK are already subject UK inheritance tax on their worldwide estate (with some limited exceptions, such as excluded assets).
It is not clear to me what inward investment would be inhibited: perhaps some wealthy individuals would not take up UK residence and so would not bring assets here? It is not going to stop Nissan say opening a new car plant (if they were so minded, after Brexit).
Wow – Jim was a bit feisty wasn’t he?
I like the way you drew him out like the gentle exorcist of Neo-liberalism you are.
‘Feeding the trope of envy and resentment’? So evasion doesn’t happen then?
It may not be unfair that some people are richer than others – but its how they got rich in the first place (tax evasion when lower paid people pay more of a proportion of their wages as tax or that wealth has been created by destroying other peoples jobs) and what they do with the tax savings money (like fund political parties who reward them with preferential treatment or pour their money into the city to create credit bubbles).
These are the sort of wealth growth strategies that should come with a public warning for society.
Poor old Jim seems oblivious to stuff like that I suppose.
He’s a standard troll
Give them about three comments and out it comes
It’s amazing how much is based on resentment – and that it is directed at the left when it’s not the left who oppresses
He’s also completely wrong if he thinks UK residents can use double tax treaties (DTTs) to legitimately avoid wealth taxes on foreign situs assets. Almost all of the UK’s DTTS are limited in their scope to taxes on income and gains. There are a few rusty old estate tax treaties but these are generally not with countries where most UK residents would think of investing. I am not aware of the UK having any wealth tax treaties.
As far as I know we have not – because we have not had a wealth tax
Surely the interesting phrase is “the UK government’s proposed ‘wealth tax’”. No news items I have seen indicate any actual proposals from any government Minister or Treasury official. Are Butterfield Mortgages, whoever they are, the only people privy to this?
(Quite a few wealth tax ideas from people like Richard, and from some self-publicising Think Tanks, but those are just provocative discussion positions).
Well, there are a few online reports just parroting the press release (as many journals do these days, in the absence of real journalists doing real journalism):
* https://www.welpmagazine.com/majority-of-uk-investors-oppose-proposed-wealth-tax/
* https://moneyage.co.uk/investors-would-oppose-introduction-of-wealth-tax.php
* https://www.wealthadviser.co/2021/01/19/294650/majority-uk-investors-oppose-proposed-wealth-tax
They surveyed 885 investors with portfolios over £10,000 (excluding main home, pensions, and savings – which shows you the sort of investors they have). Most wealthy people oppose a wealth tax, and more wealthy people oppose it more.
And then there is the canned quote: ” … there is speculation we could see a wealth tax being announced in 2021. … For now, we have to wait and see whether the wealth tax is something the government will be seriously considering in 2021. If it does come about, the consequences will be significant.” So not a real government proposal at all.
Peculiarly, BBL issued a release on a survey last December of … 885 investors.
* https://moneyage.co.uk/investors-to-prioritise-security-over-returns-in-2021.php
And there is a third report attributed to HYCM, of a survey of … 885 investors, eg:
* https://uk.finance.yahoo.com/news/uk-investors-cautious-as-two-thirds-predict-harder-covid-19-fallout-in-2021-164949273.html
None discloses the questions though, so pretty worthless, except as a way of planting stories and quotes. They all appear to be recycling one old survey of the same 885 people (assets over £10k, excluding homes and pensions) in new bottles. Perhaps someone else did one survey late last year and sold different bits of it to different people. I wonder if they all have the same agency doing their PR.
Well spotted
Agreed, Jonathan – the UK government hasn’t proposed a wealth tax since the 1974-79 Labour government (and even then, the proposals weren’t actually implemented). The Wealth Tax Commission did propose one last month but that wasn’t a government-run commission – it was independently set up.
To date of course the UK has been a safe place to park your wealth so I suggest that in practice many would rather pay the tax than risk some of the alternative locations.
In any event I suspect the extent to which the UK benefits from this wealth may well be limited
You are right, and right as to reasons
So, a company that makes its money from helping wealthy people avoid paying tax asks their wealthy clients whether they want to pay more tax???
I am surprised it is as low as 35%.
It is like doing a survey of Wife Beaters if they are in favour of far stricter sentences and physical punishments for arrested wife beaters !!!
The greatest problem, of course, is the level of enforcement needed to ensure the entire cohort of wealthy ‘investors’ comply with their tax obligations when the Tory Government has progressively reduced the level of enforcement by HMRC from armies of tax inspectors down to an office of people that might fit into one Portakabin building.
The level of tax fraud by self employed people and small businesses is much higher than it once was since once you might expect a routine “An Inspector Calls” to be every 3-4 years whereas now one has a higher chance of being hit by lightning AND win the lottery on the same day.
Since small businesses know this all too well and know they are cheating HMRC out of substantial amounts cumulatively – well in excess of benefit fraud – they will continue to vote for the corrupt regime of the Tories out of base self interest knowing that any other political party or coalition would immediately crack down on them as was the case up until 2010.
The same is very much true for wealthy ‘investors’ and their advisers. If HMRC had proper teeth instead of gingivitis gums these folk would be far more willing to be more honest out of fear of losing more of their portfolios. Advisors would be individually licenced as well as their employers and a simple one-strike would mean they sustain a substantial fine as well as ‘points’ on their trading licence. 12 points and they are out, unemployable and sanctioned for any state benefits.
Unfortunately, I cannot see the present government or that of the toothless opposition developing a pair of testicles to ensure progressive and enforceable taxation is a reality. Having a toothless level of enforcement gets the Tories their votes after all and all Sir Keith wants is for those who want to diddle the country on a grand scale to vote for him instead.
With sorrow …
Only by increasing enforcement to individuals and business intent on defrauding the state
He loss of the routine VAT visit was the biggest backwards step
Thanks
I smiled (but sadly) at your reference to the likelihood of being inspected by HMRC as being akin to winning the lottery AND being struck by lightning
Even with AI or informants helping with the selection of inspectees plus a beefed up inspection regime the reality is that it would still be attractive to evade
Would this work, instead
1. Legislate and make it quite clear and well-known throughout the land that a declaration of wealth is a claim of ownership of the particular asset (land, property, investment etc ) using the concept of beneficial ownership used by banks
2. The self-assessed value represents the maximum net worth as perceived by the owner
3. The state has the right to compulsorily purchase the asset at 120% of the assessment
4 Any asset not declared can be acquired by the state at a cost of £1 – with tribunal safeguards surrounding accidental omission
It would concentrate the mind
A whole raft of regulations would be needed to iron out the bumps, but the basic concept of being bound by self-declaration already exists – it’s just that without the threat of confiscation of what is concealed, it is still too attractive for people to cheat
I have long felt that deeming the declared value the contractual sake price to the state the best way to ensure wealth tax compliance
Worth pointing out that Danish Land Value Tax is levied on any land owned anywhere in the world by a Danish Tax Payer so some Danes will be paying Danish tax on land they own in the UK