Interview with the economist billionaires fear: this is how we get a wealth tax

MaizieD what about the £millions won on various lotteries?

I’m not sure preventing wealth is a no no.

The point is how do you prevent it - what would be the mechanism?

Whitewavemark2

I’m not sure preventing wealth is a no no.

The point is how do you prevent it - what would be the mechanism?

Yes, it’s a fine line between preventing wealth accumulation and suppressing investment in industry, businesses which benefit the U.K. and provide employment and therefore tax revenue for the government.

One of my bugbears is IHT and how it is collected.

For purely personal reasons I wish it was higher than £1,000.000, It has been set at this level since 1986. A million pounds purchasing power is considerably less now than it was then.

I would be in favour of a sliding scale, maybe starting at 5% on £2,000.000 and increments of 5% every £5 million up to a maximum of 25%.

Blair was undoubtedly the most popular Conservative PM, we still havnt recovered the 2008 crash still, that Brown walked straight into with deregulation.

A sliding scale would be fairer.

MaizieD

^Those individuals driven to achieve and accumulate wealth will always have that drive and ambition^

Yes, it's called greed when it is used only to increase their individual wealth and not reinvested productively. 'Drive and ambition' very often tramples on the poorer in society.

I do not believe that every entrepreneur is motivated by the acquisition of wealth. SMEs are the lifeblood of our economy, they may make their founders comfortable but I doubt if many go on to achieve excessive wealth.

^ Realistically it would be easier for a state to ensure they pay a fair share of their wealth towards the state's infrastructure than preventing wealth^

Why is preventing excessive wealth such a no no?

Why should the money that the state provides be accumulated by a relatively small number of its citizens before the state does anything to retrieve some of it?

The whole of the taxation system is based on those who strive to better themselves, be that a better job or expand a business, is that wrong, is providing jobs for others wrong.

DAR You have missed the point. We need a business to stay in this country. If it moves abroad then yes it could be made to still pay tax. However, if it moves abroad it will no longer employ people here. The now non employed will not be paying tax and NI. So they will not be spending money which in turn supports other business and so it goes on. We need the business to stay in this country. We must not discourage them by taxing too highly. The same for the very rich. If they leave they no longer spend here. Simple economics. I am amazed Labour supporters do not understand this simple process.

This isn’t being targeted at businesses. This is being targeted at individual wealth.

If someone is wealthy enough to have over 100 million, they will almost certainly own a broad portfolio of assets, like property, land, shares, bonds, gold, art, etc. of course one company could be worth 100 million but it is highly unlikely that it will up sticks.

Brexit “encouraged” business to move to an EU country, and many did, but you will find that they still have a foot in the U.K.

And it isn’t Labour supporters who are pushing this - although some are- it is economists from all over the world, notably French, British and American. It has supporters from the right and left, who are interested in democracy, equality and the rule of law.

Personal assets is much more difficult to pin down, a lot of property is owned by one of the companies, for example

We have a billionaire lives in the local manor house, he commutes by helicopter, but, he owns the helicopter hire business, no doubt he has a yacht, that will be owned by another of his companies, probably a private jet. I have tried to search his companies but they are private companies, with a share value of £1.

Company tax rules make it much easier to transfer shares and sell assets paying much less tax or none at all. So the art or property can be enjoyed at very little cost, through sponsorship they can even enjoy their pet sport or hobby by claiming the cost as promotion of their product.

Move the company
More likely it will be taken over by a foreign company, may be production will be continued in the UK, maybe it will be asset stripped. Most products are a mixture of components from different countries it's entirely up to the company the value it puts on each component, so can manipulate where it pays tax.

If someone is wealthy enough to have over 100 million, they will almost certainly own a broad portfolio of assets, like property, land, shares, bonds, gold, art, etc. of course one company could be worth 100 million but it is highly unlikely that it will up sticks

I think you have just illustrated why trying to tax the wealth inherent in that list would be so complex. Everything in that list has a 'value' which is subject to variation, sometimes daily.

Can you imagine the 'owner' contesting the valuation of each item for tax purposes put on it by HMRC? By the time that had been fought out the cost to HMRC in employee and working hours (they'd probably need extra staff to deal with it all) might well absorb a significant portion of the the amount it eventually agreed on.

There are also added complications in assets held in trust and by companies established to distance them from the actual owner.

From this week's Private Eye, a piece about the forthcoming Rothermere (Lord R owns the Daily Mail) divorce

The division of the Rothermere riches is unlikely to be simple... as so many of the family assets are owned offshore. Ferne Park (a family residence) is owned by the couple in trust, while other properties on the estate were bought by other tax efficient trusts. The construction of new....wings .... was funded by a loan secured against DMGT (Daily Mail group) shares held through another offshore vehicle...... The only thing that can be said for certain is that this split will keep a of of lawyers and accountants very busy

I though that this is a good illustration of the complexity of asset holding. Leaving aside the fact that this is about the divorce of a wealthy couple, it details just a small fraction of their wealth and how it is held. If the divorce weren't happening but this was being assessed for a wealth tax, how would HMRC go about it?

That is why banks and revenue depts. world wide are beginning to cooperate.

It takes time and a good deal of patience, but it is possible to track this individual wealth down.

Switzerland and Norway are models to look at if not exactly follow.

We may not get it right initially, but the point is we are beginning to do something about redistribution, inequality, rule of law and democracy.

David and I appear to be in rare agreement over some of this

I especially enjoyed his earlier assertion that Blair was undoubtedly the most popular Conservative PM, though I should point out that Gordon Brown followed the neoliberal economic 'orthodoxy' in deregulating banks; it was also done in other countries, led by the US which was completely captured by Reagonomics...

What startles me now is that Rachel Reeves is going to deregulate again to remove the restrictions put in place by Brown's government to prevent another banking crisis. And there doesn't seem to be any objection to this from Labour's recently appointed elder statesman advisor, Gordon Brown😱

(this sounds like something out of Private Eye, doesn't it )

Yes if the owner of these assets and their value didn’t contest them it would be astounding. The accountants get wealthy on these disagreements as they do on scheming up tax avoidance.

The inland revenue deal with this on a daily basis and have built up a lot of experience in this field as have other revenue depts. in other countries, and cooperating with each other.

So our revenue can use their power to obtain details of individual bank accounts world wide. It isn’t the complete picture, but it definitely leads the investigating officers to other areas.

MaizieD

David and I appear to be in rare agreement over some of this

I especially enjoyed his earlier assertion that Blair was undoubtedly the most popular Conservative PM, though I should point out that Gordon Brown followed the neoliberal economic 'orthodoxy' in deregulating banks; it was also done in other countries, led by the US which was completely captured by Reagonomics...

What startles me now is that Rachel Reeves is going to deregulate again to remove the restrictions put in place by Brown's government to prevent another banking crisis. And there doesn't seem to be any objection to this from Labour's recently appointed elder statesman advisor, Gordon Brown😱

(this sounds like something out of Private Eye, doesn't it )

Don't worry Maizie agreement probably won't last long. 🙂
Blair did nothing to reverse the damage done by Thatcher, deregulation was done in other countries, the UK did not have to follow. Brown was chancellor and I condemn him for that, be just sat on his fat backside and watched it happen.

Currently banks are pretty free to deal as they want, what they cant do is use depositors money to fund speculation, Retail banking has to be separate from commercial funding.

The problem with the UK is that since the crash in 2007 the productivity of the UK has fallen by 30% in real terms, it's impossible to fund a growing population and a longer lifespan unless productivity improves

David49

Blair was undoubtedly the most popular Conservative PM, we still havnt recovered the 2008 crash still, that Brown walked straight into with deregulation.

I agree David.

It annoys me when people refer to Blair as a former ‘Labour’ PM. He was not Labour; he was New Labour.

As a member of the Labour Party, I have no time for TB. The only time I ever voted against Labour was when he was PM (I voted Green, accepting it was a ‘wasted’ vote at that time, but I couldn’t vote for New Labour).

deregulation was done in other countries, the UK did not have to follow.

I don't think you understand how all embracing and widely implemented the neoliberal, free market, small state ideology was (and still is). Brown did what was accepted economic 'truth' at the time. It was what was taught for economic degrees and what was needed to obtain employment as an economist.

Even now it is the widely accepted model for running an economy. Brown cannot be blamed for following it. He wasn't even an economist, he had a degree in history.

MaizieD

^deregulation was done in other countries, the UK did not have to follow.^

I don't think you understand how all embracing and widely implemented the neoliberal, free market, small state ideology was (and still is). Brown did what was accepted economic 'truth' at the time. It was what was taught for economic degrees and what was needed to obtain employment as an economist.

Even now it is the widely accepted model for running an economy. Brown cannot be blamed for following it. He wasn't even an economist, he had a degree in history.

As you say it's still the economic model today and still it doesn't work so why are we slaves to it.

In 2007 GDP was £2.7 Trillion today it's £4.2 Tn
an increase of 55%
Since then inflation has grown 80% a 25% gap

Even worse population has grown by 15%,
Working population by 10%

Thats what Neo Liberalism has done productivity has fallen by 25%, 40% taking population into account.

Excuse me for having no confidence in economists

There's no guarantee an alternative economic model would fare any better? That is what economic model would fare better in the face of the same constraints, that have grown even more post Brexit as well as ever changing geopolitical forces:

1) Population growth particularly elderly population growth with consequent working population decrease
2) Continuing inflationary forces
3) The ongoing impact of Brexit - already reduced GDP by roughly 6-8%, reduced productivity, reduced business investment and Brexit imposed a costly trade barrier with the EU.
6) Post Brexit and Global migration shifts
7) Supply change vulnerability and trade fragmentation - currently being felt as a result of Middle East instability- fuel, food etc
8) Unpredictable transatlantic Alliances- + US Foreign policy + Putin expansionist rhetoric
9) Climate and Resource Instability

Outside of the EU, the UK is more isolated and more vulnerable to all these forces and risks.

Not all of the above risks and forces are as a result of a Neoliberalism. but on the other hand alternative economic models may be better- Foundational Economy? A Wellbeing Economy?

should have said entirely as a result of Neo Liberalism

Excuses, excuses, excuses,
A million 18 to 24 yr olds not working yet we can afford a million migrants to do the work
9.4 million of working age economically inactive

How much worse does it need to get before action is taken

Whitewavemark2

Yes if the owner of these assets and their value didn’t contest them it would be astounding. The accountants get wealthy on these disagreements as they do on scheming up tax avoidance.

The inland revenue deal with this on a daily basis and have built up a lot of experience in this field as have other revenue depts. in other countries, and cooperating with each other.

So our revenue can use their power to obtain details of individual bank accounts world wide. It isn’t the complete picture, but it definitely leads the investigating officers to other areas.

Personal wealth, the revenue can tax pretty effectively, Corporate held assets are much more difficult, most of a billionaires assets will be corporate held these days.

Excuses no- the constrains and geo political forces exist.

I'm aware of Milburn's report of a rise to over 1 million NEETS over the past 12 years and that there are fewer entry level jobs. He didn't conclude that a million jobs have been given to a million migrants instead of UK NEETs however. There needs to be investment and support to help these NEETs.

I've seen a figure of 9.1 million (but happy to accept your 9.4. million figure 16 to 64 year olds in the UK, who are classified as economically inactive and that number would include:
1) The 1 million NEETs,
2) Long term sick and disabled,
3) Students,
4) Those looking after family or home
5) Older workers taking early retirement.

All of us would agree that action is necessary to improve opportunities for 18 to 24 ear olds and help them get into work and also to help get some of the long term sick well enough to work.

I'm with DAR that a wealth tax is a good first step to dealing with some of our issues in the UK- and closing the massive disparity gap between taxes on wealth and taxes on work. I support strategic state intervention. I don't support the long years of austerity we have endured or the decimation of our public services and thats what needs to change.

I look at some of the Nordic countries and how they balance some aspects of the capitalist , market based economy and pairs that with strong labour unions, robust welfare systems and progressive taxation, with good public services. That would be my preferred direction of travel.

I look at some of the Nordic countries and how they balance some aspects of the capitalist , market based economy and pairs that with strong labour unions, robust welfare systems and progressive taxation, with good public services. That would be my preferred direction of travel.

You’re describing a model very close, if not identical, to the model Thatcher abandoned in the 1980s. It was a good model which was working.

Do you recognise that the Thatcher model, which we continue to follow is essentially very different from it?

Without going into detail at the moment I think that many of the challenges you listed earlier could be just as well, if not better, dealt with by the pre Thatcher Keynesian model.

The Nordic countries have small populations and are exploiting natural resources on a large scale, have low borrowings and a budget surplus. Norway in particular has a large surplus that it invests for the future as well as being a very high tax nation

The UK is the opposite we gave a large and growing population and are reducing natural resources we are using, and high borrowings. The UK could not be more different yet we show no signs of changing anything, until we do we will continue to gradually sink.