‘One-off Wealth Tax’
The UK is proposing to tax the country’s wealthiest people in order to help the government pay for the pandemic-induced public finances.
Tax the wealthy
The UK’s independent Wealth Tax Commission published a report in which it stated that the government should consider a tax on the wealthy if it decides to raise taxes in order to fix the increased public spending it has incurred during the Covid-19 pandemic.
The commission said that rather than increasing income tax or VAT, the government should instead look at a tax on millionaire couples. It has suggested to charge 1% a year for five years on individual assets above 500,000 pounds which it said could raise £260bn ($348 billion) over five years.
What is one off wealth tax? It is a one-off exceptional response to a particular crisis. Individuals would only be taxed once based on the wealth they owned valued at a particular date. What will it help achieve? A one-off wealth tax can raise substantial revenue for the government.
Proposing a one-off wealth tax isn’t a new thing. The commission added that one-off taxes have been used after major crises before, including in France, Germany and Japan after the Second World War and in Ireland after the global financial crisis.
UK isn’t the only country to have been talking about taxing the wealthy to pay for the Covid-19. Last week, Argentina passed a new wealth tax i.e., ‘millionaire’s tax’ to help the government pay for health and economic related measures needed due to the ongoing pandemic.
Those with assets worth more than 200 million pesos ($2.5 million) will have to pay a one-off tax of at least 2%, which the government said could collect up to $3.7 billion, with the funds used to buy medical equipment and supplies, provide support to small and medium-sized firms, and to assist poor neighbourhoods.
One thing to note is that it is going to be just an exceptional one-time tax payment for the wealthy that will boost the government’s revenue and help it cover the billions that it has spent on measures to fight the Covid-19.
Another factor to consider is that income inequality has grown during the pandemic therefore taxing the rich based on their net wealth would help reduce the gap instead of increasing VAT or income tax slabs that would make the ones who have less pay more.
On the other hand, some argue that this one-off levy could be too complicated and would be hard to implement and may end up becoming permanent in nature. However, we will have to see how the implementation part of this works out and how the wealthy react to it.
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