As I noted in The National yesterday:
I stress this is not a deliberately contrarian view. I am aware of all the theoretical arguments for taxing wealth more. I agree with them. It's just that as a chartered accountant with forty years of experience in trying to agree valuations with HM Revenue & Customs, I know what a minefield this is.
Make a demand that millions of people do this either as a one-off exercise or, even worse, annually, and the whole administration of tax in the UK might collapse into a quagmire for dispute and litigation as a result of which every other aspect of the tax administration will be undermined. That is not my idea of good tax reform.
As I added in that article:
I then noted:
I took part in a discussion on this issue with National journalist Xander Elliards yesterday afternoon (live, but I cannot now find it on the site) during yesterday afternoon. He was dubious at first. He was very surprised by my opinion column when he first read it, having assumed I was bound to be in favour of a wealth tax. At the end of the discussion, he was convinced by my argument.
That's one down and many more to go, you might say. But I am convinced this is the way to go.
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Absolutely, the higher rate pension relief is a scandel, instead of paying more tax they get a better pension which undermines support for a better state pension
An annual Wealth tax would, as you say, be difficult to administer. It would only work if it was restricted to individuals with at least £20m. I’m not sure how much a 2% tax on wealth above that would raise but certainly more the cost administration.
I’m excited about hearing your alternative proposals. Tweaking existing rules instead would be easier politically for sure.
But, what is wealth? And, how do you measure it?
And remember, you would need to measure it for a lot of people to find those with over £20 million.
Use same method as when valuing a deceased person’s estate for Probate. The individual would self declare and a high sample would be checked by HMRC. Criminal sanctions imposed for people acting in bad faith
Fine…..and my lint still stands. HMRC will be overwhelmed
We’re all waiting with baited breath! I think a Wealth tax is possible but I’m sure you’ve got some more practical ideas
Karl Popper in his book “Poverty of Historicism” noted that when you have highly complex systems – the best approach is to change things (improve things) incrementally (small scale re-engineering) – rather than going for profound changes. Make a change & see what happens – style of. Thus the propoals to make (modest?) changes to existing tax laws would seem to be a low risk way of getting results (surely the whole point), rather than a “wealth tax” which falls into the “quantum leap” category of change, with no certainty of outcome.
Agreed
Mike
You do realise don’t you that by referencing Popper, you have just described how the welfare state has been wound down over time since it was created don’t you?!!
The key now is to turn the tables the other way.
As for Richard’s suggestion I’m all for it. Heated calls for a wealth tax are just too proto-fascist for me – it reeks of identity politics, one group being encouraged to pick on another.
I applaud Richard’s contrarianism because he has done what so few people do – he’s gone and looked.
The way I would sum this up is that he seems to have looked at the distribution of money, looked at the small but multitude of means/rules that help and exploit this mal -distribution down stream and is targeting those rather than slapping a tax bill at the end of it.
It’s subtle, less overtly political and seems more infused with natural justice and fairness which is what I would expect from Richard to be honest.
Thanks for that PSR. In fact Popper was one of Thatcher’s favourites. That said, I would not characterise what was done to the NHS as a little bit of re-egnineering – most of it was quantum leap (Neu Labour & PFI, the nonesense under Cam-moron etc). Adding, his book (published in 1957) was, sort of, aimed at the NHS, e.g. chapter 21: Piecemeal vs Utopian Engineering. Fact of the matter is, there was political will(supported by the population) for a “UK New deal”. Poper, Hayek et al may not have liked it but tough.
Mike
I disagree.
If you read ‘The Five Giants: A Biography of the Welfare State’ by Nicholas Timmins, (1996?) his analysis was that the NHS and the rest of the policies began to be undermined or eaten away / reduced immediately after being created.
The reasons for this were many, but this is why I say that the intent to chip away at it all began really early and has been one long process to turn back the tide that has become bolder only more recently.
There are a lot of perverse value judgements being made about these matters through history: who deserves what, obsessions with ‘moral risk’ (but yet no recognised moral risks apparently in becoming wealthy), what the state can afford on the basis of false narratives about tax & spend, and this notion that the taxes of the rich pay for everything so those who need services must be a burden that they must be relinquished of (see Ayn Rand), the use of official and unofficial/sly austerity as the GDP of the public sector is reduced and reduced because of free market dogma.
My better half has just come out of hospital after keyhole surgery to remove an infected appendix.
Going in, everything was spot on and even thought it seemed like a fight to get surgery it went ahead.
It was when she got down on the ward overnight afterwards that reality came back. Over stretched staff, staff not administering the right medicine and food that she said was ‘inedible’.
She was in the discharge room for 09:00 to go home the next day, but was not formally discharged until after mid day with no lunch when we picked her up at 2:00pm that afternoon.
There has got to be reckoning about this one day.
In the meantime we can all start panicking now about public buildings and China to keep our minds of the destruction of the NHS.
Popper was a very strange person. He certainly seems to have been difficult to get along with. The apocryphal story of Wittgenstein threatening to hit him with a poker possibly has some basis in truth but almost certainly did not happen the way Popper claims, if indeed it happened at all. In any event, there was no love lost between the two philosophers and Popper seems to been taken considerable umbrage having to “make do” with a chair at the LSE while Wittgenstein, whom he considered his intellectual inferior, occupied a chair at Cambridge.
Politically, as a young man, he was a Marxist and in the first half of his life gradually drifted to the right ending up, for all intents and purposes, a free market fundamentalist when he came under the influence of Hayek. Ironically one of his stated reasons for rejecting Marxism was its historicism, against which he forcibly argued and which he also identified correctly in Plato’s Republic, but did not seem to realise he ended up supporting an equally historicist ideology, historicism being the notion that you only have to fix certain things in a society and history will automatically take care of everything else. But he did not see himself as supporting a coherent ideology but as supporting various piecemeal improvements to the body politic.
In future centuries he will not be remembered for any of this but for his contributions to the philosophy of science, which, in retrospect, appear perhaps not quite as startlingly original as they seemed at the time.
Makes absolute sense, we need to tax wealth, not a wealth tax.
This tax on wealth should be as embedded as PAYE and Corporation Tax and as ongoing as they are, not a one off flash in the pan
What about a land tax for land owners of large, (to be defined), estates … unless there is unrestricted public access, (to land that was nicked in any case). And yes that includes crown estates and especially crown estates.
Wait and see….
The Hong Kong land tax, I assume they still have it, seems to work fairly well. However there are a lot of complications. Hong Kong is predominantly rural but contains some very densely populated urban areas. It has nature reserves, dairy farms, Buddhist monasteries mountainous regions in which the only viable economic activity is raising a few goats, traditional Hakka walled villages whose character the HK government is trying to preserve and Hong Kong Disneyland. These are all treated differently. My son, who shared a flat with his girlfriend in Tai Koo Shing until they had to leave in a hurry about two years ago, paid land tax directly to the local council. It is divvied out among the tenants of the many multi-story housing developments by an arcane formula that no one seems to quite understand but on the whole people bo not complain about it. If a flat is left empty, the landlord pays the tax.
As I said, it seems to work fairly well. What problems arise originate mainly from seemingly unnecessary complications. The lesson seems to be that if you are going to have a land tax, keep it as simple as possible.
Your description of an opaque tax does not sound like a model to be replicated to me.
I think further tax on income in any form just continues to increase the inter-generational unfairness in this country.
Older people sit happy in million pound houses with golden pensions and new social care taxes
The relatively shrinking income tax payers pay more tax for fewer services with student loan tax and out of reach house prices.
Then you want to charge them more for services the elderly (asset owners) disproportionately use?
I suggest that what I am doing is a massive step forward in addressing inter-generational injustice
I can foresee a UK wealth tax ending up similar to the Dutch system. Where the government creates a fictitious interest rate and expects you to pay tax on an income that you have never received. It violates several principles of a good tax system. And Dutch courts have now said that such wealth taxes violates the European Convention of Human Rights. Actual income should be taxed because it is actual income that is measured.
Wealth is seen as a problem because the income earned form it is not taxed the same way as earned income from work. The problem is solved with fairer income taxes.
The Dutch system is dire but there is more to the solution than income tax
Your tax suggestion doesn’t really hit the top earners, especially those with unearned wealth. So it’s not doing the same thing as a wealth tax. How do we tax the oligarchs?
Have you noticed I said there are 29 more suggestions to come?
At a theoretical level I would welcome wealth and/or land taxes.
Both are politically contentious and a practical challenge.
In the meantime why not just go for the ‘small wins’? Reduced tax reliefs on pensions, abolish NI to equalise tax on earned and unearned income come to mind. The machinery to make it happen is already in place and the political issues are tractable.
I am a practitioner
A range of wins works for me
It’s going to be a gradual process. I’m sure Richard has a plan. I hope it includes – abolish NIEE’s (use ER’s for state pension), restrict pension relief, top rate of income tax 50%, CGT, earned & unearned income tax charged at same rate. To ensure basic fairness we need to tax all forms of income at taxed the same rate. I still think we need some form of tax on wealth though.
HMRC is already overloaded and underfunded, not least because of all the deferred payment schemes they have negotiated and need to monitor for businesses struggling with the quadruple hits of Covid, Brexit, interest rates and inflation. That’s already an invisible time-bomb; adding a massive new burden to manage wealth tax could break both HMRC and the country completely.
An underfunded HMRC is not a valid reason. It would be a separate unit looking after a separate tax. As it’s all new no problem recruiting and training a new enforcement team, stick it in the North East.
Only argument against a Wealth Tax (assuming you are a progressive) is getting it through Parliament with the inevitable opposition fuelled by the right wing press. Richard is probably right, easier ways to do it
I thought you were a troll having no clue what you were talking about and now I know that’s true.
Your comment makes no sense whatsoever and is unrelated to how HMRC works.
I have come late to the debate.
But as if to back up Richards point there was a report recently that Simon Cowell sold his London house for £30 million below the asking price.
It highlights the sort of fun and games that a wealth tax could cause
Indeed….
I have just read the article. I have enormous respect for Richard but at the moment my mind is in a whirl. I will study what Richard has written and maybe understand his argument.
Fine to an extent, to tax the benefits of wealth more appropriately, instead of going after wealth itself:
equalise all taxes on income from assets with taxes on wages,
disregard diversity of ownership vehicles,
nationally-fixed, locally-levied Council Tax bands per £100K in value, including extra land not within a normal curtilage and not used for sole income from agriculture,
The same Council Tax liability levied cumulatively on occupiers, separate ownership, and under-occupation of either.
But wealth has been created/boosted by QE – our money issued by our Bank at our Government’s instruction. How do you address the moral issue of wealth being created or enhanced by the citizen’s own institutions, but is only taxed in benefit of the citizen when it is spent or produces income?
Are you saying we should not tax income from wealth more because of QE?
Why?
“Are you saying we should not tax income from wealth more because of QE?”
Fine, to an extent, to tax the benefits of wealth more appropriately, instead of going after wealth itself, which is what I believe you are advocating, principally because of the complication and avoidability of a Wealth Tax.
But a lot of wealth has been created/boosted by QE. Much of wealth is therefore our money issued by our Bank at our Government’s instruction. There is therefore a moral issue why we are not taxing wealth itself, but only going after its income or expenditure.
I agree with your proposal, and make some of my own along your own lines. But I still think a Wealth Tax is a morally appropriate correction in our economy. .
But the growth in wealth far outstrips the increase in QE.
How are you going to identify the QE originated wealth?
I could not….
I absolutely agree with cutting the tax relief on pensions, but it seems misleading to call it a subsidy. Taking tax from someone, then immediately crediting it back to their pension doesn’t feel like a subsidy, it’s just not taking as much of their money. Similarly if we cut higher rate tax by a penny I don’t think that could reasonably be described as a subsidy, even though the net effect would be similar. If pension tax relief is a subsidy then I can now announce a plan to subsidise business by trillions of pounds, with step one being to collect slightly more trillions of pounds from said business!
The pension company gets the basic rate money. That, I can sure you, is a subsidy. So too is the refunded money on the higher rate contribution. What else is it?
Taking it to an extreme to make the point, if the government took 100% of your salary, then gave you X% back, I don’t believe you would think of that X as a subsidy. The same idea holds here, but with smaller percentages. Logically a salary sacrifice pension is the same ‘subsidy’, but with money the government didn’t ever take off you. Following that logic, all the money they could have collected from you (again, potentially 100% of what you earned) but didn’t would be a subsidy, which would render the term meaningless.
If you have to justify your claim with an absurd argument you’ve lost.
I suggest you give up now.
Of course the government’s actual payment into a pension fund is a subsidy and so is the higher rate relief.
Politely, stop claiming what is glaringly obviously untrue.
Abolish all tax and replace with Annual Ground Floor and Roof Rent , AGFRR; simple to collect and can’t be avoided.
It’s charged per square metre according to established land types so no valuations necessary.
It raises far more public funds than existing taxes as it includes all land and property and forces both public and private sector owners to steward their property to meet the cost.
Dilapidated and vacant sites will quickly become a thing of the past
Politely, this is utterly absurd.
It takes no consideration of capacity to pay.
It is not progressive.
And to assume valuation is simple is just wrong.
This is not a solution to any problem.
I work in I.T. for a living and when any department says ‘we are going to implement something new’, I shudder. Often all that is needed is a fix to something that is unstable or has become unstable over a period of time.
What is usually behind this need for change is someone’s ego. They need to be seen to be doing something radical, to show that the past holders of the leadership position were incompetent.
I suspect that part what this wealth tax is about is pandering to someone’s ego, so they can show they’re doing something.
Your suggestion, Richard, is far more sensible and easier to achieve, but would not stoke someone’s ego or allow them to showboat and blame the past.
Agreed