A one-off tax on Britain’s super-rich is the only feasible way to tackle the government’s spending deficit and protect vital public services, according to a report backed by the Labour MP Dan Jarvis and the left-of-centre Fabian Society thinktank.
The levy would apply to UK residents with more than £10m in assets, with a supplementary charge for those with more than £20m in shares and property.
The Fabian Society said the British tax authority, HMRC, could target the richest holders of “passive, unearned wealth” to bring in extra cash, but that the rate at which the tax was charged should be left to the government of the day.
Difficulties in estimating the extent of assets the super-rich hold also prevent supporters of a wealth tax judging how much a levy would raise, it said, following HMRC’s failure to publish data on the wealth of Britain’s top 1%. The report argued a levy would galvanise the tax authorities to crack down on those concealing their assets offshore or through complex ownership structures.
Earlier this year the Institute for Fiscal Studies, which has put forward proposals of its own for an annual wealth tax, said the chancellor, George Osborne, would need to raise more in taxes or cut expenditure further to meet his fiscal promise of generating a budget surplus by the end of the parliament.
Jarvis said any sums raised by a one-off levy would make a significant impact on the government’s finances.
“The threshold is so high that only those who are truly wealthy pay the levy, it is one-off so those who pay it aren’t driven away, it exempts many difficult-to-value objects such as family heirlooms.”
He said the tax was also needed to make a dent in the growing wealth inequality that was damaging the nation’s cohesion and wellbeing.
“Inequality of wealth soared during the Thatcher years. Extreme inequality tempts some in our society to opt out of Britain’s shared institutions: state schools, NHS hospitals, even taxes.
“Private schooling turns inequality of outcome into inequality of opportunity – as the wealthy buy better outcomes for their children. Private hospitals insulated the wealthy from the shared experience of the decline of the NHS during the 1980s. But nothing is more corrosive to the body politic than tax avoidance.”
He said it “sticks in the craw” of nurses, soldiers and small business people that others reduce their taxes “through fictitious film schemes or Swiss bank accounts”.
Other European countries apply small annual taxes on wealth to supplement taxes on income and VAT, which are the exchequer’s biggest sources of revenue. Thinktanks and economists have favoured wealth taxes that place an annual charge on the value of land or property.
At the last election, the Labour party proposed an annual mansion tax on homes worth more than £2m, to raise around £1.2bn. The proposal, however, came under fire after it was revealed that between 70,000 and 100,000 homes were likely to be affected.
Jarvis said the prospect of an annual tax that caught professionals along with the super-rich was politically unacceptable, leaving a one-off levy on the top 0.1% of earners as the only way of forcing the richest in society to make a decisive contribution to the UK’s recovery from the financial crash.
The tax would disregard employment and trading income, and focus on unearned income from property and shares. It would offer the super-rich a formula by which the level of tax was based on declared assets, but HMRC would investigate if taxpayers held assets offshore or through a complex web of company holdings.
The report’s author, Nick Donovan, said: “This is a detailed plan for a one-off wealth tax on those with more than £10m net wealth. It is non-intrusive for those who have clearly played by the rules, but takes a stringent approach to calculating the wealth of those who may have underpaid taxes through aggressive tax avoidance.”
The Fabian Society’s general secretary, Andrew Harrop, said: “The ‘unique contribution’ is a pragmatic measure that can be used to reduce the deficit and build up resilience to future economic shocks. But it conveys radical intent by taking a share of the huge financial rewards the super-rich are able to generate, not from hard work but from returns on their passive wealth.”
