New Report Says Personal And Corporate Tax Reforms Should Also Be Tried To Balance Wealth Gap

A new report says a wealth tax should be raised in countries where tax reform isn’t possible, targeting individuals and companies that have thrived during the pandemic.

The International Monetary Fund (IMF) has released its half-year fiscal monitor report, where it concluded governments across the world should raise a wealth tax to help cover the cost of Covid-19.

The report comes after the Wealth Tax Commission in the UK said last year that a one-off wealth tax could raise £260bn, based on a 5% rate over £500,000 per individual, but the issue wasn’t raised in the Spring Budget by Chancellor Rishi Sunak.

Talks of a wealth tax have received mixed reviews from specialists; while the amount of money raised can be substantial, it can negatively affect those who are swept up at the lower end of the threshold.

Expert Opinion

“There are a number of issues raised by introducing a wealth tax, including liquidity issues where taxpayers have seen their homes significantly increase in value but don’t have liquid assets to pay for a tax on the value of their home.
“A wealth tax would encourage redistributions of wealth and restructuring of assets, if and where possible; we’d likely see taxpayers leaving the UK and a reduction in migration to the UK as a result.

“There are also issues in relation to the retrospective nature of a wealth tax. Who would be caught by the wealth tax net? Would you be caught if you have recently arrived and settled in the UK, or would you be caught if you recently left the UK? All of these factors create headaches for levying the tax and potentially loopholes to be exploited unless carefully considered.

“A focus on reforming and simplifying existing taxes rather than introducing a new wealth tax is, in the long term, a better move – and the UK’s tax system is ripe for reform in many areas.” Jessica Fazzone - Senior Associate Solicitor