Calls for a wealth tax should be firmly rejected by the chancellor as there would be no revenues until at least 2029 as HMRC wrestles with complex new systems
In a discussion about the chancellor’s options for the upcoming Budget at a webinar hosted by the NIESR thinktank, tax expert Dan Neidle said that a wealth tax would bring ‘nothing’ in the first three years if implemented.
Neidel said the government ‘would be lucky to raise any revenues until 2029,’ stating that there was a ‘dishonest wealth tax campaign all over social media’, which claims that ‘we are going to have a much more ambitious wealth tax’.
‘There is always an issue with fringe ideas and they are all over social media, but not many people tend to rebut them.’
Describing the idea as ‘economically destructive’, Neidle said the evidence showed that a wealth tax would hit GDP between 2-5% and the ‘damage it does to growth is vast’.
‘Look at the digital services tax, that took 18 months to implement, the sugar tax took 25 months - these are simple taxes, they just needed half a dozen people at HMRC to do this.’
But the wealth tax would be on a totally different scale, based as it would be on tax on assets.
Neidle said: ‘HMRC would need a whole new infrastructure to create a tax system from scratch’.
‘The wealth tax, a really bad idea, even if you did it, it wouldn’t raise anything for years, and the damage it does to growth far exceeds the revenue you raise.’
Calls for a wealth tax have been rising, most recently from Green party leader Zach Polanski who set out a ‘patriotic’ case for a wealth tax. Neidle was part of a discussion hosted by the National Institute of Economic and Social Research (NIESR) along with other who warned against a wealth tax.
The NIESR have released an analysis of the chancellor’s options for the upcoming Budget arguing that the most realistic option for Reeves would be to raise income tax by 4% and reduce employee national insurance by 3%, and scrap any plans for a wealth tax, even for a one off raid.
Ed Cornforth, economist at the NIESR said: ‘Wealth tax really affect business investment… this would likely lead to a reduction in savings that, in turn, would raise the cost of capital, reducing investment in the future.
‘Even if it were a “one off”, which would not lead to any chance in the incentive to save, there would need to be some sort of guarantee that this was the case.’
Pictured: Dan Neidle at the National Institute of Economic and Social Research
Links
Analysing the Chancellor’s Tax Options | National Institute of Economic and Social Research