Budget 2021: Sunak urged to encourage growth over wealth tax
21 February 2021
Chancellor Rishi Sunak must avoid targeting the rich and instead focus on growth in next month’s Budget, according to the CEO of deVere Group.
Nigel Green’s warning comes amid a call from the Institute of Financial Studies for the Chancellor to continue supporting businesses during the UK’s economic recovery from lockdown.
Green says: “The IFS is absolutely right to raise the alarm to Rishi Sunak about raising taxes as he reportedly eyes changes to capital gains tax, corporation tax and pension tax relief for high earners. Now is certainly not the time for putting further pressure on job and wealth creating businesses and individuals. It might further curtail investment and demand at the very time the country needs it most to rebound from the worst recession in 300 years.”
Rather, the Chancellor should be implementing policies for long-term, sustainable economic growth instead of “taxing it into the ground,” Green adds.
The Wealth Commission recently proposed that the government introduce a one-off wealth tax to help plug the huge hole in the Treasury’s coffers as a result of the pandemic spending. However, Green called the idea “misguided.”
Greene comments: “First, as the plans demand that main homes and pensions would be included in a one-off wealth tax, not just the super wealthy would be dragged into this wealth raid. It could force many households who are asset but not cash rich into debt.
“Second, history teaches us that ‘soaking the rich’ is a poor idea. The people these policies intend to target, typically, have the resources to move to lower tax jurisdictions if the tax burden becomes too great. We saw this happen when France tried to launch a wealth tax, the ultra-high net worth moved elsewhere.”
According to Green, the economy would suffer considerably, because of the disproportionately large contribution the ultra high net worth make to the country’s finances.
Green says: “There is an argument that if the government is serious about having the better off pay more tax, they should cut rates further and allow them to become wealthier. This would, say some commentators, incentivise top achievers to stay in the UK. However, I suspect that implementing this philosophy would be political suicide in the current climate.”
He adds: “I would urge the Chancellor to reject calls for a one-off wealth tax and for the time being avoid raising taxes and focus on growth and support policies.”
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