When we set up Tax Justice UK back in 2017 we wanted to make progressive taxation an issue that politicians were confident to talk about.
For too long wealth taxation in particular had been a no-go area for MPs. They were often fearful of media and political backlash if they suggested taxing wealth in a smarter way.
The Labour Party conference shows how far we’ve come.
In advance of her speech, the shadow chancellor, Rachel Reeves said: “I do think that people who get their income through wealth should have to pay more”. This is something we've been calling for alongside our allies.
Reeves set out how unfair the tax system is and laid down principles for how a Labour government would deal with tax reform. She announced that Labour would scrap business rates and replace them with something “fairer”.
She also warned Amazon’s billionaire boss Jeff Bezos: “If you can afford to fly to the moon you can pay your taxes here on earth!” She committed to ensuring the digital giants pay a fair amount of tax in the UK.
It’s now clear what the shadow treasury electoral strategy is - they want to build a broad coalition with proposals that both keep the Labour membership happy, but also capture business support.
But for them to succeed there is more work to be done. The shadow chancellor did not commit to taxing income from wealth the same as income from work. And while the opposition’s course on tax issues appears to be heading in the right direction, we still haven’t heard enough detail on their plans.
Finally, I am concerned that Labour is still talking about the need to “balance the books” as a household would have to. Government finances are not the same as a household, as our colleagues at NEF have pointed out. Borrowing is still very cheap. The consensus amongst economists is that the government should be spending now to support the recovery, rather than worrying too much about the deficit.
We’ll keep pushing politicians of all stripes to commit to taxing big companies and the wealthiest. This will help support the public services we all rely on as we recover from the pandemic, and meet the challenges of climate crisis, rampant inequality and demographic change.
ASOS and Serco were among six companies across finance, outsourcing, retail, real estate, mining and pharmaceuticals who made £16 billion in excess profits during the pandemic.
Our new report “Pandemic Profits: who’s cashing in during covid” shows that a number of companies saw their global profits leap during the last 18 months. The profits of one company, the Scottish Mortgage Investment Trust, were up 801% compared to previous years.
The report argues that these companies are examples of a broader trend where some companies benefited from government pandemic spending, while others were well placed to profit from economic changes that have been accelerated by covid.
The covid pandemic has been unprecedented in its impact. Not only did it cause a recession that saw the wealthiest grow richer, whilst others struggled, it also resulted in some companies making what appear to be unprecedented profits.
The report argues in favour of a tax system that supports a fair recovery and keeps up with the economic changes accelerated by the pandemic.
Those who have suffered over the last 18 months should not be asked to pay more, however, it is fair to expect those who have prospered to contribute more to the economic recovery.
The report recommends that the Chancellor:
You can read the report here.
The government will raise National Insurance by 2.5% and announced a similar increase to the way dividends are taxed to help fund social care.
Investment in the care system is long overdue but the majority of funding in this announcement will go to the NHS. Nor does the policy go far enough, according to plans set out by the Women’s Budget Group.
Tax Justice UK Head of Advocacy, Tom Peters, said: “Tackling the crisis in social care is long overdue, but the proposed reforms don’t go far enough, and National Insurance is an unfair way to fund investment in the care system.
“After a pandemic that saw the wealthiest become even richer, those with the broadest shoulders should be first in line to take the strain as we start to build back.
“That means tax reforms including equalising capital gains with income tax, abolishing tax loopholes and ensuring companies pay their fair share of tax should also be on the table if we are to create the best possible social care service for all."
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