Potential merits of introducing new wealth taxes

Antony Seely; Fintan Codd

Background

A Westminster Hall debate on the ‘Potential merits of introducing new wealth taxes’ has been scheduled for 14 June 2022 2.30-4pm. The debate has been initiated by Richard Burgon MP.

The UK tax system does not include a tax on the stock of someone’s wealth, although assets and wealth may be taxed in certain circumstances: for example, the purchase of property may be subject to stamp duty land tax, the gains made by the sale of assets may be subject to capital gains tax, and the value of someone’s estate at the time of their death may be liable to inheritance tax.

In September 2021 Richard Burgon MP tabled an early day motion calling on the Government to “introduce a wealth tax as a progressive alternative to raising taxes on working people”, noting that “the UK Wealth Commission, made up of a team of over 50 experts on tax policy, concluded in their December 2020 report that a wealth tax would be preferential to raising taxes on incomes.” The motion was signed by 43 MPs.

In answer to a parliamentary question in November 2021 the Financial Secretary to the Treasury Lucy Frazer set out the Government’s position on introducing new taxes on wealth. The Minister said, “the Government is committed to a fair tax system in which those with the most contribute the most. The UK already taxes assets and wealth across many different economic activities, including the acquisition, holding, transfer and disposal of assets, and income derived from assets.” She went on to note, “the Wealth Tax Commission … found that if considering Inheritance Tax, Capital Gains Tax, Stamp Duty and Stamp Duty Land Tax, the UK is among the top of the G7 countries for wealth taxes as a percentage of total wealth.”

In answer to a subsequent parliamentary question on this issue in February 2022 the Minister observed that the Wealth Tax Commission had concluded that an annual wealth tax “would not be effective because of high administrative costs relative to revenue, and because it would be easy to avoid paying the tax.” In its report the Commission had made a suggestion for a potential one-off wealth tax, and the Minister argued that this “would be a complex undertaking, and the amount of revenue raised would be highly dependent on the final design of the tax.”

Further reading

Profiting from pain: the urgency of taxing the rich amid a surge in billionaire wealth and a global cost-of-living crisis, Oxfam, 23 May 2022

A wealth tax could create an emergency fund to get people through this crisis, Richard Burgon MP, Labour List, 11 May 2022

Wealth Taxes in Europe, Tax Foundation, 19 April 2022

An Economic Perspective on Wealth Taxes, US Congressional Research Service, 1 April 2022

Solidarity and wealth tax, European Parliamentary Research Service, April 2022

How to introduce a radical wealth tax, Official Monetary and Financial Institutions Forum, 23 March 2022

When taxing the rich, how about a little carrot to go with the stick? Mark Littlewood, The Times, 21 February 2022

Taxes On Wealth – The Global Landscape, Charles Russel Speechlys, 2 February 2022

The historical origins of wealth taxation, Journal of European Public Policy, 29(5) 2022

Taxing Extreme Wealth: an annual tax on the world’s millionaires and billionaires:what it would raise and what it could pay for, Patriotic Millionaires, 2022

Rightfully rewarded? Reforming taxes on work and wealth, Bright Blue, 2022