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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

What do you think of this idea of a wealth tax?

589 replies

LuluJakey1 · 06/07/2020 23:10

This is from The Guardian this afternoon. It is the third article I have seen in the Press two days promoting this idea.

www.theguardian.com/commentisfree/2020/jul/06/arts-wealth-tax-rishi-sunak-nhs-public-services?CMP=Share_iOSApp_Other

Personally, I think it is bonkers. She seems to be suggesting that ALL wealth in this country - houses, savings, pensions, shares/paintings etc should be subjected to a one off tax of 10% to get us out of the financial mess.

DH and I would have to find about £80,000 cash! We'd have to sell the house?

Yes- Yes it is a good idea and you are BU to criticise it.
No- It is an awful idea and you are right to criticise it.

OP posts:
CruCru · 07/07/2020 15:37

The problem with this sort of thing is that pretty much everyone (me included) has a very good reason why they should not be taxed.

These threads always seem to focus on property - I can see why, it is most people's biggest asset. However, it is really awkward to value and putting a value (right or wrong) on everyone's property is going to be incredibly expensive.

The one thing that can be valued pretty easily is money in the bank - including pension funds and ISAs. You could take 10% from those reasonably simply. In the case of final salary pensions, I would think that it would be a case of deducting 10% of the assets held and telling employers to reduce all pensions built up (including those already being paid) by 10%. This is likely to be unpopular with Tory voters.

If this would hit everyone (regardless of age), it would also hit children (as some children have ISAs and SIPPs).

A few people on here seem to think landlords are evil. I don't. A good landlord provides a needed service. My old landlord had 40+ properties (in Newcastle) and kept a team of electrician, plumber, decorators employed. He was responsive whenever anything went wrong and basically ran his portfolio as a business. I can't see how that is so very different from other small and medium sized businesses.

Chessie678 · 07/07/2020 15:47

As a tax adviser I think this is an unworkable idea. Apart from anything else it would be ridiculously complex to administer and clog up HMRC and the courts with cases about how it should be applied. It would also be very difficult to prevent avoidance. Just some of the complexities - can debts be deducted from wealth and, if so, is car finance, mortgage, student loans etc. included? What about a personal guarantee someone has given their business which is in debt? Do all assets need professional valuation? Are assets outside the UK included and, if so, how does wealth tax interact with the tax of other countries? What if a person gives away assets before the tax is applied? Would a person need to sell their business in order to pay this tax or should there be a relief for that, like for inheritance tax? I'm not saying it's impossible to do but it would be a nightmare. It's hard enough for HMRC to collect tax on income and they have had decades to work out a system for that.

It would also lead to people dumping their assets onto the market in order to pay the tax which would lead to house prices and potentially share prices crashing. You would need to allow payment by instalment over a long period to prevent this.

There are alternatives (like printing money) which get to essentially the same place without some of the advantages of a wealth tax. A government voucher scheme would slightly redistribute wealth depending on how it was done - if one person has £100 and one person has £1000 and you give both £500 the first person now has £600 and the second £1500 so they are more equal than they were before.

For those saying close loopholes or tax amazon and facebook, I wish people would specify what they mean by this. HMRC and the government (particularly the conservative government) have made huge efforts to crackdown on tax avoidance in the last decade and to a large extent these efforts have been successful. I could name a hundred pieces of legislation aimed at preventing avoidance or closing loopholes. In my practice I see very few clients who want to pursue the sort of dodgy schemes which used to be quite commonplace. Avoiding tax really isn't as simple as hiring an accountant and asking them to dream up some scheme for you and most midsize and large UK companies are now very conservative on tax issues because they are worried about reputational risk and challenge from HMRC. There is a new tax being planned to tax turnover of large tech companies and the UK is leading the way on this. Usually, when large multinationals aren't paying much UK tax it's because another country (e.g. the USA) has taxing rights and the UK doesn't have the right to tax under international law and treaties. I do think HMRC could be better funded to apply the laws they have at their disposal though and that that may increase tax revenue but nothing like as much as people expect.

I think the answer here is to print some money, do what we can to get the economy back on track by encouraging spending (like with the voucher scheme) and maybe tinker with tax rates later. Personally I think massively increasing inheritance tax and lowering the threshold for it would be the fairest thing to do to increase tax revenue but inheritance tax has always been politically unpopular and relatively easy to avoid so I doubt that will happen.

DGRossetti · 07/07/2020 15:58

As a tax adviser I think this is an unworkable idea. Apart from anything else it would be ridiculously complex to administer and clog up HMRC and the courts with cases about how it should be applied

Just change the law. Nothing stays the same forever anyway.

After all, in the words of the song: "Who ya gonna call ?"

Bells3032 · 07/07/2020 16:06

Changing a law is not as easy as people seem to think it is. You need to consider every single tiny little consequence of it and legislate for it. You then also have mps who like to add and remove stuff and some form or another filibuster it.

I once tried to change a single line in a piece of legislation. It was not contentious in anyway and consultations shows it had support of 99% of respondents. It still took a good 18 months to do. Except in extreme circumstances when everyone is agreed it takes a long time to change laws. And then omplemtning it is a whole other headache

passthemustard · 07/07/2020 16:10

It's threads like this that make me worry I might be a ....... Tory 😩😩

DGRossetti · 07/07/2020 16:12

Changing a law is not as easy as people seem to think it is. You need to consider every single tiny little consequence of it and legislate for it. You then also have mps who like to add and remove stuff and some form or another filibuster it.

Oh, it is when the political will is there. And as for considering the implications - maybe that was the case once. But I can't see there's been much evidence of late.

Much like finding money for something. Remember "no magic money tree" of 2017 ? Followed by goodness knows how many billions since on pet projects ?

PigletJohn · 07/07/2020 16:12

"As a tax adviser I think this is an unworkable idea. "

what if it is a tiny percentage?

What if it is aimed only at Pension schemes and/or Property?

doolallyboo · 07/07/2020 16:14

The trouble is there is generational inequality & the goalposts have moved so its not really possible to catch up.

20 somethings today are facing wages that haven't really changed. Very high house prices & are buying later so that's less opportunity to gain equity plus I don't think they will see anything like the historic gains. They are having less children & also having them later. They won't have access to private & public sector pensions that used it exist. Owning a BTL or a 2nd home is much more expensive then it used to be & lending criteria has changed. They are unlikely to see a state pension & potentially not even a NHS structured as it is now. The greatest impact on their life will be the wealth their parents have accumulated & if it's passed on to them. Not great for social mobility.

Chessie678 · 07/07/2020 16:17

@DGRossetti Of course they would need to change the law but the issue is how the new legislation would be drafted and what the supporting guidance would say and then how it would be applied. Even people willing to pay the tax in good faith would need guidance to work out what they owed and might need to ask HMRC questions. The certainly would. And people always have the right to challenge HMRC’s decisions through the courts or are you suggesting we remove that? Equally HMRC would need to be able to pursue people who hadn’t paid through the courts.

onlinelinda · 07/07/2020 16:19

Taking the lower middle and middle class is not the answer. Look higher.

mrsBtheparker · 07/07/2020 16:21

Shades of Dennis Healy, tax them til the pips squeak, fat lot of good it did them then.

Alsohuman · 07/07/2020 16:25

Much like finding money for something. Remember "no magic money tree" of 2017 ? Followed by goodness knows how many billions since on pet projects ?

Exactly this. I wonder how the people insisting last December that a Labour government would ruin the country feel about the current spending spree? Because they’ve gone awfully quiet all of a sudden ...

DGRossetti · 07/07/2020 16:26

[quote Chessie678]@DGRossetti Of course they would need to change the law but the issue is how the new legislation would be drafted and what the supporting guidance would say and then how it would be applied. Even people willing to pay the tax in good faith would need guidance to work out what they owed and might need to ask HMRC questions. The certainly would. And people always have the right to challenge HMRC’s decisions through the courts or are you suggesting we remove that? Equally HMRC would need to be able to pursue people who hadn’t paid through the courts.[/quote]
That's all predicated on the future being the same as the past. Which is often isn't ... especially if many things are in motion.

Parliament is supreme and can pass whatever laws it likes. There's very little to stop it doing so. As we found out last year. Whether or not it would is a mere political, not administrative, legal or constitutional matter. And unfortunately - I know this may be shocking to some - I have fuck all trust in any politician. Even as I type, trial by jury is being quietly taken round the back and duffed up.

Anniemabel · 07/07/2020 16:27

When talking about homes it would be 10% of the value of your equity - clearly not 10% of the value of your house!

But a wealth tax of that nature will never work. Adding 1% to the basic rate of income tax would probably generate more revenue and leave people less annoyed.

Baaaahhhhh · 07/07/2020 16:28

What if it is aimed only at Pension schemes

Didn't Gordon Brown already do that, and hasn't it been a complete disaster?

DGRossetti · 07/07/2020 16:33

Adding 1% to the basic rate of income tax would probably generate more revenue and leave people less annoyed.

Or adding 5% to a higher rate, would raise even more and affect less.

What is the "amount raised/number of people affected" threshold ? Bearing in mind how the austerity we never had managed to pull money from the bottom to keep the top in football clubs ....

PigletJohn · 07/07/2020 16:37

"Didn't Gordon Brown already do that, and hasn't it been a complete disaster?"

No, and no.

Viviennemary · 07/07/2020 16:38

Put the higher rate of tax up by 3%. Normal rate increased by 1% but raise tax free allowance to £15k.

PigletJohn · 07/07/2020 16:39

"When talking about homes it would be 10% of "

try not to obsess over that improbable percentage.

Chessie678 · 07/07/2020 16:49

@PigletJohn
It would certainly be more workable from an administrative point of view is there was a nilrate band (e.g. no tax on assets up to £500k) so you take most people out of the tax altogether. That would allow HMRC to concentrate on fewer cases and the most lucrative. It may also slightly reduce the asset dumping issue as the market would be less affected overall. A lot of the problems would remain though. You also tend to get avoidance around thresholds - so people will try to argue that their assets are below the threshold. Wealthier people tend to have more complex finances so each case would probably take HMRC a lot of time, particularly as there will be so much uncertainty in how the tax should be applied because it is new and so much incentive for the taxpayer to reduce it (if it is 10% of wealth - if it was a smaller percentage you might get better compliance). A standard tax enquiry can take HMRC a year and that's when the taxpayer fairly co-operative and you're dealing with well tested legislation. Again, not saying it's impossible, just that it would be difficult and there would be a high cost to collecting the tax and, unless very carefully drafted, would have some horrible indirect effects. Would be good for tax lawyers though!

I don't think it would be fair to target some assets and not others. Why should someone with a £500k pension pot have to pay but someone with £500k in shares outside a pension pot not have to? You would also create complexity - e.g. if property is included what about a share in a property investment fund or a right over land which isn't actually property? If you announced the tax in advance and it only targeted some assets people would liquidate them and invest in something else so it would have to be done with immediate effect which creates its own issues (i.e. it would be rushed and poorly thought through).

@DGRossetti

Yes, I know the government could change the law in an unprecedented way but what would the new law say? If it just said "everyone must pay 10% of their wealth in tax" you need to define what wealth is and then work out what everyone's wealth is and therefore how much tax they owe. You need a system for how to do that even if it's just that HMRC decides. It really isn't as simple as it seems.

And if HMRC decide that I should pay £100k of tax based on a completely erroneous assessment of my wealth (e.g. mistook me for someone else / thought I owned a house which I don't etc.) and I can prove that do you really think there should be no right of challenge through an independent body like a court?

PinkSparklyPussyCat · 07/07/2020 16:51

Why do they have to live in the South East ?

I was born here, my family and friends are here, my job is here. Until recently DH and I had elderly DM's and I still have an elderly Uncle. We might look to moving to a cheaper area but it'll still have to be in the South East.

ekidmxcl · 07/07/2020 16:52

If any money is taken from any bank accounts, it will just be theft.

Added to that, it could then cause a resurgence in people keeping cash in mattresses and the like. Now that notes are coated in polymer material, it doesn’t even matter if they get wet. I can just imagine my granny sewing cash into her curtains. And then if cash is kept in large quantities in people’s homes, burglary will suddenly become a more attractive crime. I don’t think that the goal posts can be moved in this way. You put your cash in the bank so it can be safe. Not so the government can easily count and steal it.

Like a pp has mentioned, if you take cash from ordinary people, they’ll need to adjust their spending to compensate and then the economy will be hurt further. And charities will be stung because those are easy direct debits to cut off at the touch of a button.

DGRossetti · 07/07/2020 16:58

@DGRossetti [] Yes, I know the government could change the law in an unprecedented way but what would the new law say? If it just said "everyone must pay 10% of their wealth in tax" you need to define what wealth is and then work out what everyone's wealth is and therefore how much tax they owe. You need a system for how to do that even if it's just that HMRC decides. It really isn't as simple as it seems. ... [] And if HMRC decide that I should pay £100k of tax based on a completely erroneous assessment of my wealth (e.g. mistook me for someone else / thought I owned a house which I don't etc.) and I can prove that do you really think there should be no right of challenge through an independent body like a court?

You're still looking forward through a mirror. Who says HMRC will still exists in our Brave New World ? Why not just have a team of collectors who go around, make a quick assessment and that's that. True, hardly fair (which suggests the current arrangements are ...) but as I noted, parliament can do whatever it likes. There is literally nothing to stop it.

Anyway, moving away from the more extreme flights of fantasy ...

Since the country has shown it's going to continue to vote Tory come what may, then Dishy Rishi only need come up with a plan that satisfies the people that paid to put Boris in no. 10. Which is probably 3 phone calls at most. No danger of the population getting uppity. If they weren't going to do it when their lives were at stake, they won't now.

Pumpertrumper · 07/07/2020 17:01

Threads like this are exhausting

(People with no assets of savings) YES, let’s tax those selfish, greedy middle class workers!

(People with some assets and savings but nowhere near enough to survive a 10% tax) No way, we’ll be bankrupted, leave us alone!

(People with loads of assets and savings) Either our accountant will find a loophole or we’ll move abroad to escape it.

The stark reality is the economy wasn’t doing great before Covid. People were strapped and struggling across most income thresholds and continue to do so. The people who could afford to repay the furlough debt are the least likely to actually repay it.

PigletJohn · 07/07/2020 17:01

I find the idea of "10%" rather odd. I don't know any reputable source for it. I think it has been thrown in just to frighten people so they can get indignant about it.

Let's suppose that
"HMRC collected £634.7 billion in taxes in 2019-20"

And that
"Total Wealth (including Private Pension Wealth)
March 2018
14.63 (£ trillion)

And that there are a thousand billion in a trillion

Then a wealth tax of 10% would bring in (please check my maths) £1.5trillion approx

Which is well over double the 2018 tax take.

And an absurd idea. That UK tax take would be trebled.

Does anybody seriously want to suggest that 10% is real?

It's just a straw man.

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