In the year since the Chancellor, Rishi Sunak, delivered his first Budget to a packed Commons chamber in March 2020, more than 135,000 people in the UK have died from Coronavirus, there have been three national lockdowns, the economy has shrunk by 9.9 per cent and Coronavirus support measures have cost around £280 billion.
An independent commission established last spring by the London School of Economics, the University of Warwick and the Economic and Social Research Council to analyse proposals for a wealth tax has rejected an annual tax but has advocated a one-off charge.
The commission comprises senior academics from the universities involved as well as tax barrister, Emma Chamberlain.
While Chancellor, Rishi Sunak, has previously rejected the idea of a wealth tax, the commission’s independence means that the idea may gain traction in the coming years.
In rejecting the idea of an annual wealth tax, the commission argues that such a levy would “have higher administrative costs relative to revenue than a one-off tax, which means that it is currently not feasible” considering the lower tax thresholds.
It goes on to note that “at very high levels of wealth, the extent of these responses remains uncertain. Some responses could be mitigated by careful design, but others would be more difficult to resolve.”
Instead, the commission argues for substantial reforms of existing taxes on wealth instead of “minor tinkering”. They suggest this approach would be more efficient economically and less costly to administer.
In contrast, the commission advocated a one-off charge to help repair the public finances following the pandemic, arguing:
A well-designed one-off wealth tax would raise a total of £260 billion at a rate of five per cent over £500,000 per individual or £80 billion at a rate of five per cent of £2 million per individual, payable at one per cent per year over five years.
The report goes on to say that such a measure should not be pre-announced in order to prevent forestalling but that deferrals should be permitted where taxpayers are constrained in their liquidity.
The commission says that such a charge would be preferable to increasing taxes on work or spending.