Key facts
- A wealth tax on UK households with over £100m in assets could raise £10bn annually.
- The proposal is for a 2% minimum charge on extreme wealth.
- Fewer than 1,000 of the wealthiest UK households would be affected.
- Academics Gabriel Zucman and Ben Tippet authored the proposal.
- The tax aims to fund public services and address wealth inequality.
- The plan includes measures to prevent tax avoidance and evasion.
Academics have proposed a wealth tax on the UK's super-rich, suggesting it could generate £10bn annually to fund public services and combat inequality. The proposal, put forward by Gabriel Zucman, an economics professor at the Paris School of Economics and the University of California, Berkeley, and Ben Tippet, a lecturer at King's College London, involves a 2% minimum charge on households possessing more than £100 million in wealth. This measure would impact fewer than 1,000 of the wealthiest households in the UK.
Andy Burnham, the mayor, has indicated that a wealth tax could be part of his long-term plans for the UK. While his close advisors have focused on raising the capital gains tax threshold, Burnham has expressed a desire for greater fairness in the tax system. He stated his intention to avoid creating societal divisions or demonizing any particular group.
The proposed wealth tax would require HMRC to assess the accumulated wealth of the richest families, encompassing assets such as property, private businesses, pension wealth, art, and land. The objective, as outlined by the report, is not to impose a broad tax but a focused one on extreme wealth, ensuring billionaires contribute at similar rates to others, thereby raising substantial revenue and mitigating runaway inequality. Zucman noted that due to the limited number of affected households, the UK government could implement this tax swiftly.
Zucman's previous research indicates that households with incomes of £100 million or more possess the means to circumvent most existing wealth taxes through mechanisms like holding companies, charitable trusts, and family transfers. Tippet highlighted that a well-designed minimum tax on the wealthiest is a realistic and targeted reform that would enhance tax system fairness and generate significant revenue. He also argued that the common criticisms of wealth taxes, such as administrative complexity and asset valuation issues, are less applicable to this proposal due to its narrow focus.
The plan includes a provision requiring wealthy families to continue paying the tax for at least 10 years after relocating abroad, preventing avoidance through emigration. The growing global concern over wealth inequality has spurred discussions about higher or additional taxes worldwide. For instance, Germany and Brazil have suggested a global minimum 2% tax on the wealth of the world's 3,000 billionaires to fund poverty reduction efforts. The report also contrasts the proposed tax with historical wealth taxes, which often had lower thresholds, broader application, and significant exemptions, leading to avoidance and political opposition. The authors emphasize that wealth taxes are most effective when focused on the wealthiest, applied broadly across assets, and supported by robust administrative enforcement.