The Wealth Tax Commission sees a one-off wealth tax as being:
a) fair as it falls on the broadest shoulders - although I would note that some of the assets in the taxable pot, such as a pension, are likely to be illiquid. Furthermore, for many people, much of their wealth arises from inflationary gains on the value of their home (particularly in the South East of England). Wealth tied up in bricks and mortar may well be owned by people on low salaries or those who have retired.
Effectively, taxing business profits twice also seems odd, or is really a tax on undistributed profits. This creates a tax on the prudent who leave profit in a business to be prepared for future emergencies. Surely, if business and the government have learnt anything from Covid-19, it should be the value of being prepared and retaining a contingency fund? A wealth tax is likely to discourage such sensible behaviour.
b) efficient as it would not discourage economic activity and the administrative costs of collection should be relatively low - I disagree with this conclusion, as I fear it may deter many foreign investors from investing in the UK.
Some assets are relatively easy to value but others, such as shares in unquoted companies, are notoriously difficult. Even the value of shares in quoted entities can vary considerably over a short space of time. As such, if fairness is genuinely important to those implementing this tax, it may be necessary for volatile assets and pension pots (which tend to include such assets) to be valued on an average/smoothed out basis.
c) very difficult to avoid – this is not necessarily the case, as there could be a flight of capital out of the UK by non-domiciled HNWs.
As an economy, undoubtedly we need to raise more taxes to pay for the costs of the pandemic. However, a productive way of achieving this is to encourage wealth generation. That way, the cake as a whole is bigger, thereby increasing the government's share. The risk with a wealth tax is that it has the reverse effect and discourages people from saving and investing in their futures.
Further, it is billed as a one-off tax - does Hansard note whether William Pitt the Younger promised the House the same for income tax raised to fund the Napoleonic wars?
The Wealth Tax Commission has recommended that households pay a 1% levy on wealth over £500,000 each year for five years. The tax would apply to a person's wealth -including their home and any other properties, pension pots, business and financial wealth. Any debts, such as mortgages, would be deductible