Following COVID, Argentina is the first large, worldwide economy to introduce a one-off ‘millionaires tax’ on citizens who own assets of more than 200m pesos, the equivalent of £1.8m. People who fall into this bracket can expect to pay between 1% and 3% of net assets, which is expected to raise £2.7bn to help pay for the debt resulting from the COVID pandemic.
Whilst the UK have yet to employ such measures to pay for the £400bn gap left in the public finances, the Wealth Tax Commissions have suggested that a 5% tax on personal net wealth that is in excess of £500,000 could raise as much as £260bn over the course of five years.
Is this likely to happen? Norway, Spain, Switzerland and Belgium all have their own versions of a wealth tax, although Sweden and France have both abolished their wealth tax after it was found to encourage the wealthy to leave the country, and thus prove counterproductive. However, it is difficult to rule it out completely in the UK following the pandemic, and promises in the last manifesto not to raise income, NICs or VAT leave little room for anything else.
The wealth tax as suggested would include all main assets, such as your home, and pension pots but exclude debts such as mortgages. The Treasury has responded by suggesting that “getting people back to work, encouraging and incentivising businesses to take on new employees and new apprenticeships, ultimately creates the wealth that funds our public services.” They have also pointed out that currently the top 1% of income taxpayers are projected to pay over 29% of all income tax. This is believed to represent a fair system that is sustainable and encourages growth in the UK economy. However, the COVID bill has to be paid and the government will be looking to increase revenue somewhere so a wealth tax is impossible to rule out at this point.