The one-off taxation of millionaire couples could be the solution to helping the UK’s finances amid the coronavirus pandemic, tax experts have said.
The Wealth Tax Commission has said the government should look at a tax for millionaire couples, instead of increasing income tax or VAT.
Taxing the rich
The Wealth Tax Commission said that an extra one per cent per year tax rate could be imposed for a period of five years on wealth of more than £1 million per two person household, which could raise £260 billion.
This would be equivalent to raising VAT by 6p, or the basic rate of income tax by 9p for the same period. It should be something the government considers, if it does decide to raise taxes in order to help the country’s finances, said the Wealth Tax Commission.
The proposed tax would include all assets, including main homes and pension pots, alongside business and financial wealth. However, it does not include mortgages.
This would be more fair than raising tax on incomes, on goods people buy, or by increasing National Insurance contributions, said the commission.
The commission also proposed another alternative, which would see a threshold of £4 million set per household - based on two people with £2 million each - taxed at a rate of one per cent per year, on wealth above the threshold amount.
This one-off wealth alternative would raise £80 billion over five years, after admin costs, according to the commission.
One of the academics on the commission, assistant professor of economics at the University of Warwick, Dr Arun Advani, said, "We're often told that the only way to raise serious tax revenue is from income tax, national insurance contributions, or VAT.
"This simply isn't the case, so it is a political choice where to get the money from, if and when there are tax rises."
‘We've also taken steps to ensure the wealthy pay their fair share’
The Treasury has said it had already taken steps to make sure that the wealthy pay their fair share of tax.
Addressing the commission’s report, a Treasury spokesperson said, "Our priority right now is supporting jobs and the economy, and believe that getting people back to work, encouraging and incentivising businesses to take on new employees and new apprenticeships, ultimately creates the wealth that funds our public services.
"We're committed to a fair and efficient tax system in which those with the most contribute the most.
"Our progressive tax system means the top 1 per cent of income taxpayers are projected to pay over 29 per cent of all income tax, and the top 5 per cent over 50 per cent of all income tax in 2019-20.
"We've also taken steps to ensure the wealthy pay their fair share, reforming the taxation of dividends, pensions and business disposals to make the tax system fairer and more sustainable."