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Pressure is increasing on Rachel Reeves To find new ways to promote the sick economy As economists warn treasure At least £22 billion may need to be found in the upcoming budget.
Many people now predict chancellor There will be little choice other than raise taxes to find more money For the exchequer, rising borrowing costs and weak growth forecasts have significantly reduced its room for maneuver.
This difficult economic backdrop will require money somewhere, and the Chancellor has now refused to Labor is breaking its manifesto commitments don’t pick up taxes For working people. This could mean an increase in the main rate of income tax is on the table, as Ms Reeves warned she would not choose “easy answers”.
However, a growing number of campaigners have stated that “Property The tax can increase government funding, and possibly without forcing ministers to back out of pledges. It is an economic policy adopted by very few countries, focusing on the extremely wealthy.
Cabinet ministers have so far rejected this demand Property However, Ms Reeves indicated that she did not want to implement the measure in its strongest form. however, chancellor Also said in October that higher taxes The rich will have “part of the story” in the budget, leaving the door open to some wealth-targeted taxation.
Here’s everything you need to know about the estate tax argument and what the experts have to say:
What is property tax?
Wealth tax is a direct tax on a person’s total net worth – things like property, investments, cash and other assets. Unlike most regular taxes, the idea is to target accumulated wealth rather than just the income earned that year.
Along with being a new way of raising revenue for the government treasury, the policy is also designed to redistribute wealth Reduce economic inequality.
The UK already has some taxes that focus on wealth, such as inheritance tax, capital gains tax and council tax. Changes to any of these may be under consideration by the Chancellor later this year.
Capital gains tax is most similar to wealth tax in that it is a tax charged on the sale of an asset. However, most models of wealth tax will charge an annual fee based on the value of the assets held, even if they are not sold.
The idea of a wealth tax has proven divisive among economic experts, with debate over its fairness, revenue-raising potential, and economic impact.
Could wealth tax apply in the UK?
Campaigners say wealth tax could generate huge sums treasureWhile affecting only a small number of individuals, those who are less likely to feel the sting of high attainments.
Tax Justice UK is calling for a 2 per cent levy on individuals who have assets worth more than £10m. They say this will affect 0.04 per cent of the population, while raising £24 billion per year.
The calls come as the wealth of the ultra-rich in Britain has grown hugely in recent decades, while living standards have fallen. Dropped for low to middle income people,
sunday times The Rich List is set to record 171 UK billionaires in 2023 – up from 15 in 1990. Plus, there’s a record number of children now living there poverty In Britain, and in uncertain Living conditions such as temporary accommodation.
The Chancellor should seriously consider wealth tax, says author and host macrodose Podcast, James Meadway: “This starts to chip away at the idea that we’re going to allow wealth to accumulate in too few hands forever.”
Responding to criticism that wealth taxes could pose a threat investment In the UK, the Economist said: “investment Between Brexit and the financial crisis it has fallen off a cliff. Sixty percent of wealth in Britain is inherited. It’s not something that’s created by someone going off and setting up a new business.
“If these people were good, our economy It would be better. It’s not better, so they’re not as good, so it doesn’t matter.”
He added: “It’s not going to solve every single economic problem, but 24 billion is not a number to be sniffed at if you’re the government now and looking at how you’re going to continue to fund the NHS, how you’re going to pay for not making massive benefit cuts, how you’re going to get rid of the two-child benefit cap.
“There are a lot of things we could do with that money that aren’t being done right now because it’s just in the hands of very, very rich people.”
What are the problems associated with property tax?
One of the most difficult factors in calculating the benefits of any wealth tax is predicting what the behavioral response will be. Although the wealth tax would raise a large amount of money in any scenario, this uncertainty means it is difficult to model.
A common concern is the risk of “capital flight”, where wealthy individuals – who tend to be more globally mobile – simply leave the UK, or at least move some of their assets.
The money can also be held in a wide variety of assets, anything from cars to art, meaning it can be hard for tax authorities to know how to apply the levy.
Dan Needle, founder of Tax Policy Associates, said it is highly uncertain how much could be raised by implementing a wealth tax. While it is difficult to predict how many wealthy individuals will leave the UK if the measures are implemented, tax experts suggest that just 10 people leaving could result in billions in lost revenue.
This is because 15 percent of the projected yield will come from just 10 ultra-wealthy individuals, while 80 percent will come from fewer than 5,000 people.
As well as the risk of capital flight, Mr Needle argues that the economic damage to the UK from a wealth tax would be massive.
He explained: “If you tax something, you always get less. All taxes are a trade-off; you just have to be clear about what they are. With a wealth tax, you’re taxing savings and investments, so you get less savings and investments.”
Tax experts point to modeling of wealth taxes in the US and Germany, which found that the long-term impact was a 2 percent and 5 percent reduction in GDP, respectively. it would be harmful for economy And hit hard on employment.
“We need to respond not to what we want policies to be, but to what they actually do,” Mr Needle said. “There are a lot of ways you can do tax reform and tax the rich fairly in a way that doesn’t hurt the rest of us.” These may include reforms to land tax, capital gains tax and inheritance tax.
Any of these are probably more likely options for this Labor Than implementing property tax. But as the Budget approaches, the demand for more redistributive measures of some form or the other is likely to intensify.