According to the FT, The UK system of taxing capital is broken but introducing a wealth tax risks making the situation worse, a former top civil servant at HM Revenue & Customs said.
Edward Troup, previously first permanent secretary at HMRC, told MPs “We have a lot of taxes on various aspects of capital . . . none of them work properly,” said Sir Edward on Wednesday, citing capital gains, inheritance and council taxes as examples. “It’s always better to try and fix what you’ve got than to pile something else on top of it.”
Politicians should focus on thinking about whether the existing system was taxing wealth in the right way, Sir Edward said.
“We probably should tax people who get wealth for undeserved reasons like just sitting on their house while the prices go up, but that’s a gain and that should be taxed in a very different way from passive ownership of wealth you’ve acquired through your own hard work and savings,” he said.
Emma Chamberlain, a barrister at Pump Court Tax Chambers, who has researched the behavioural effects of tax increases, said an ongoing annual levy would lead many wealthy people to avoid it by leaving the country, but a one-off tax would be harder to escape.
How does that make you feel? What if they scrapped the current system to start again. Would that improve the outcomes and increase fairness? Probably not. Whichever way you look at it, its tax. We all know we need to embrace a community cost and it’s a juggling act for the government. If a tax system is introduced that increases the tax for the wealthy, and in turn the wealthy move jurisdictions because they feel they are being unfairly treated, the UK taxpayer loses a taxpayer.
But what about Emma Chamberlain, comments…”a one-off tax would be harder to escape.” Mike Tyson said, “everyone has a plan until they get punched in the mouth”. If wealthy taxpayers were given a “punch in the mouth”, unexpected yes, but is there a need to move jurisdiction? Probably not. But no one wants to feel they’ve been punched and it depends on how long your memory is to balance the perceived injustice!
Simply we will all have to find a way to accept unfairness.