This is post is based on a comment piece we wrote for CIty AM this week.
A political row about wealth could be about to kick off over who should bear the cost of funding our public services after Covid.
Experts led by the London School of Economics and Warwick University this week announced a plan that could raise £260bn through a one-off five per cent wealth tax on millionaire couples. The Wealth Tax Commission included economists, lawyers, think tanks and professionals who advise the very wealthy.
The tax would be paid by UK residents with personal wealth above a set threshold. It would include all assets such as main homes and pension pots, as well as business and financial wealth, but minus any debts such as mortgages. It would be paid in instalments over five years, and apply only to wealth above the threshold.
Read more: UK has ‘significant’ ethnic wealth gaps, latest data suggest
Such a tax would not only help fund the Covid recovery. It would show the public that the government is serious about confronting inequality.
We are an incredibly wealthy country with more than£14 trillion in pensions, property and investments. But that wealth is not shared equally.
Inequality is extremely damaging our country. For many, no amount of hard work is enough to overcome this disadvantage. Someone earning £26,000 a year today would have to save every penny, for 96 years, just to reach the wealthiest top 10 per cent, according to the Resolution Foundation.
It’s a matter of racial injustice too. For every £1 owned by a white person in the UK, households of Pakistani descent have around 50p, of those Black Caribbean descent around 20p, and those of Bangladeshi descent have a measly 10p, according to the Runnymede Trust.
And women are hit disproportionately hard too. Out of the £96bn earned in income from wealth in the UK, only 35 per cent goes to women.
These are the warning signs of an economy that is dangerously off-balance. Our economy could be a vehicle to healthy, prosperous and hopeful lives for all. But right now, if you are a middle earner, a woman, or from an ethnic minority, the road ahead is more likely to be blocked.
We need to get back on track. And at this moment, with the economy reeling from the pandemic and fierce debates raging about how to fund it, politicians have the power to change direction.
Whether this government could vote through such a tax in the current political climate is another matter. But make no mistake, changes are afoot. Whatever happens, as we recover from Covid it is right that those with the broadest shoulders bear the heavier load.
And there are other options besides a new tax. Rishi Sunak is considering a plan to make those earning thousands through capital gains pay a fairer rate of tax. There are also rumours he could end the pension tax relief bung that sees higher earners given a bigger incentive to save for old age than people on lower incomes.Our research at Tax Justice UK found that both of these ideas would have significant public support.
When it comes to deciding how we should pay for the economic enormity of the past year, we should remember that the Prime Minister has vocally ruled out a return to austerity and deep public service cuts. Note too that, whatever the traditional political norms, the first Covid lockdown sawConservative voters shift towards support for higher taxes, mirroring wider mood among the general public.
In the past, when there has been a need to raise cash politicians have turned to the nation and announced that “with a heavy heart” they need to put up income tax and VAT.
This time around there are other options on the table. A wealth tax could help ensure that the Covid budget blackhole is funded by those with the most resources to contribute, leading to a less unequal, more just outcome for all.
It may sound radical, but those disadvantaged by our current economic system want politicians to deliver.
The spending review outlined by the Chancellor paints a daunting picture of where the economy is headed in the months ahead.
It is good that Rishi Sunak ignored calls to gut public services. But worryingly he still plans to go ahead with a “cap for carers” and freeze most public sector workers’ pay.
There is no need for more austerity. We can ignore the idea that we are in danger of "maxing out the nation's credit card". The government's own figures show we are on course to pay £20 billion less than expected in debt interest next year.
The impact of the pandemic after 10 years of public spending cuts means that the government needs to go much further if it is going to support communities as we build back from the epidemic. This will require sustained investment.
Lots of uncertainty remains and tax rises are off the agenda for now.
At the point the Chancellor starts to think about tax changes, he needs to protect those who’ve been hit hardest by the pandemic and ensure that those with the broadest shoulders pay their share. That would be fair, and popular.
This is a repost from the Green Alliance Blog by Sara Hall our head of movement and partnerships.
The climate crisis is intensifying and the Covid-19 pandemic has exacerbated existing levels of inequality in the UK. This highlights the urgent need for a just and green recovery and, more specifically, for the tax and climate justice agendas to go hand-in-hand. But we need to get our act together quickly to make sure they do.
Many economists and activists, in the UK and across the world, have been highlighting how tackling inequality should go hand and hand with action on climate justice. Writing for the Sunrise Movement in the US, Nobel prize winning economist Joseph Stiglitz has made a compelling case that reforming tax could be an easy way to raise money for a ‘green new deal’ while increasing economic efficiency. He suggests taxing dirty industries; a broad range of taxes on pollution and financial transactions; closing tax loopholes and ensuring that income from work and wealth is taxed at the same rate. He estimates that all of this would provide trillions of dollars over the next ten years, money that could be spent to fight the climate emergency. Taxes are, of course, just one way of funding the green transition – cheap government borrowing is going to play a central role in funding the investment that’s needed.
A Tax Justice Network paper by Laura Merrill adds to the evidence on taxes, estimating that: “Global revenue gains from the removal of subsidies and the efficient taxation of fossil fuels could be around US$2.8 trillion to governments or equivalent to 3.8 per cent of GDP.” Oxfam has also called for governments to consider wealth taxes, luxury carbon taxes and wider progressive carbon pricing in addition to essential measures to shift energy supply rapidly to sustainable, renewable sources at a fair cost to ordinary people.
There are doubtless lessons the UK could learn from these analyses, and commentators here are beginning to point out that progressive taxation could target the UK’s entrenched wealth inequality, while meeting the country’s climate commitments and delivering a green recovery.
One of the recommendations in the investment section of the recent Reset report by the APPG on the green new deal, in fact, was to rebalance the tax system to tax wealth more. “Bringing taxes on wealth in line with taxes on income”, it suggested, “would help to reduce inequality and underpin increased investment in public services.” A more equitable tax system, in other words, could play a key role in funding the green recovery.
These calls for a better approach to taxation come at a time when we know that tax rises are on the cards. Chancellor Rishi Sunak has hinted they might be needed and the Institute of Fiscal Studies has suggested rises of over £40 billion are “all but inevitable’” in the medium term.
The UK is in a unique position to be bold and ambitious in firmly connecting up the dots between climate and tax justice in the UK: in January it will embark on a new independent trajectory as ‘global Britain’ and will take up the presidency of the G7, as well as hosting the UN COP26 climate summit in Glasgow.
It’s therefore great to see some initial work being done to explicitly connect the tax and climate agendas in the UK. Examples include Green Alliance’s TransformTax project and the work Common Wealth and the New Economics Foundation are doing on redesigning tax for a just, green recovery.
At Tax Justice UK, we are advocating for a fair and effective tax system that benefits everyone. This includes taxing wealth at least at the level of income. Our award-nominated research with Survation and the University of Sheffield found that 74 per cent of people want to see wealth taxed more including, perhaps surprisingly, 64 per cent of Conservative voters. Separate research by Demos and by the LSE and University of Warwick Wealth Tax Commission made similar findings.
But that doesn’t mean it is going to happen: other players in this space are certainly advancing their agendas. For instance, the right wing Centre for Policy Studies recently released a report calling for tax cuts for businesses and share traders, reducing income tax for the highest earners and VAT increases for everyone. And news reports suggest Amazon will pay almost nothing under the new digital services tax while also being part of a panel, described as ‘secretive’, set up by the Cabinet Office to help shape public sector procurement.
Other reports have highlighted that the fossil fuel industry has been meeting UK ministers behind closed doors to discuss the COP26 talks, and it is unlikely they will be arguing to end the subsidies and tax breaks they currently receive. At the same time, in response to the pandemic, it is estimated that G20 countries have used at least $181.43 billion of public money to support fossil fuel companies without any conditionality attached. This public money has taken many forms and includes – but is by no means limited to – tax breaks.
To counter these threats, we believe it is vital that we continue joining up the climate and justice agendas. Next year, as the UK hosts the global climate summit and embarks on a green industrial revolution, is the right time in the UK to advance the case for people and the planet to prosper over corporate profit.
The Tax Justice Network has published a series of papers and a podcast on climate and tax justice and hosting a global conference on 10 and 11 December to discuss how to pay for the climate transition.
News out this week suggests that Amazon will pay almost nothing under the new Digital Services Tax. The government brought in the tax to try and get some revenue out of the internet giants. But the design of the tax means its impact will be limited.
According to news reports, Amazon plans to pass on almost all extra costs to third party sellers on its platform. It’s not just Amazon. Google has also announced that it will also pass on extra costs from the tax to customers.
Amazon’s UK tax bill last year was reportedly £293 million on sales of £13 billion. But it’s currently impossible to know how much tax the company should actually be paying. We need to lift the lid on company accounts to get a clearer picture of how much tax big companies need to pay.
The Digital Services Tax will supposedly bring in £500 million a year. This is a drop in the ocean compared to the amount that the UK loses through tax avoidance.
We’re calling on politicians to reform the way we tax big corporations. We need to end the current system that allows companies to unfairly slash their tax bills. Tinkering around the edge isn't enough. And it doesn't work.
Our partners at the global Tax Justice Network have set out how to comprehensively reform the global corporate tax system. Politicians should take notice.
The public wants action. 84% of people want politicians to close loopholes to stop tax avoidance.
But not all companies behave this way. The Fair Tax Mark is given to businesses that are fair and transparent on tax. There is another way.
The coronavirus lockdown saw Conservative voters shift in favour of higher taxes, according to our new report, “Talking Tax: How to win support for taxing wealth”. The report looks at attitudes on public spending, wealth and tax by Tax Justice UK.
A change in mindset among Conservatives forms part of general public support for higher taxes that we uncovered. The research was done in collaboration with Survation and the University of Sheffield.
In the long run it’s clear that Brits want fair tax rises to support better public services, tackle inequality and deal with the climate emergency. When you talk to people, there is no clamour for tax cuts. The middle of a recession is a bad time for broad brush tax rises, but higher taxes on the rich make sense and are popular.
Polling and focus groups carried out between the 2019 general election and the middle of lockdown also uncovered significant support for taxes on wealth, with 74% of people wanting to see wealth taxed more, including 64% of Conservative voters and 88% of Labour voters.
The proportion of Conservatives who said they were personally prepared to pay more tax to fund services went up from 41% to 46% between March and June. There was also strong Tory voter support for rumoured increases to capital gains, pension tax relief and corporation tax. Conservative support for higher corporation tax leaped from 61% in March to 74% in June.
The findings come as Chancellor, Rishi Sunak, mulls once in a generation changes to the way wealth is taxed ahead of the autumn budget.
Tax Justice UK used 11 focus groups and two major polls to test a number of policies under consideration by Mr Sunak. They include: taxing income from wealth at the same rate as income tax; reducing pension tax giveaways to higher earners and upping corporation tax. All measures were supported by a majority of the public. Conservative voter support for these measures was even higher than that of the general population.
The report also includes a shot across the bows amid speculation the government could cave in to US pressure against taxing digital giants like Amazon and Google.
It finds near universal anger with tax avoidance by corporations and the wealthy with 81% of people saying it is morally wrong for companies to avoid tax and 76% saying the same about tax avoidance by individuals.
The Trump administration is reported to reject a Brexit trade deal unless Boris Johnson drops the UK’s 2% digital sales tax which aims to recoup some of the tax avoided by multinationals.
Tax Justice UK is calling on politicians to finally fix the way we tax big multinationals and not cave in to pressure water down the rules.
Download the full report here.
Download the March polling results here.
Download the June polling results here.
*** The application period has now closed ***
Decolonising Economics, Tax Justice Network and Tax Justice UK want to understand how the UK tax system props up structural racism in this country and its tax havens. This includes the role of UK Overseas Territories and Crown Dependencies. In order to do this, we are commissioning a scoping project to understand what research exists on this subject at the moment and what avenues for future research might look like. We believe that at present there is limited research on the intersection between tax and racial injustice in the UK.
There are many ways in which we already know the tax system and racial injustice intersect including:
We want to work with a researcher to deliver a report covering the following:
This work could involve interviews with stakeholders in academia, activism and financial institutions who can advise on research that is available already or that needs exploration. As part of this process we will bring together a group of economic justice organisers and activists to provide an accountability mechanism for this research so that it supports their campaign strategies and planning. This group would meet once at the set up of the project to input into the scope of research and once more to review the draft report. Taking part in this process should be factored into the working days.
Budget: 20 days work at £300 a day for a total of up to £6,000.
To express your interest in carrying out this piece of work please share your CV and a short half page expression of interest on why you’re interested in the work, how you would carry it out and how your skills and experience will support its success. Please send these to firstname.lastname@example.org by midnight on 7th September.
Download this terms of reference here.
Tax Justice UK was asked to provide input into how the Scottish Government can achieve an inclusive and green economic recovery from the covid crisis.
Working with our partners in Scotland, we pulled together a short briefing outlining the what that the Scottish Government should do. They include:
You can read the full briefing here.
2015 marks a historic moment in British history - the point at which the debt created from bailing-out slave owners during the abolition of slavery was completely paid off by the tax payer. That's 180 years in which residents in Britain have been paying into the pockets of those who benefitted from the slave trade and continued to benefit from the compensation scheme that succeeded it. Naomi Fowler, at our sibling organisation Tax Justice Network, has done an incredible job at delving into this shocking fact. As is becoming more well known, this country’s wealth was in large part built on slave labour and colonial exploitation.
This isn’t just about the past. Those deep economic inequalities persist between white and Black, Asian and minority ethnic (BAME) households today. According to the Runnymede Trust, for every £1 owned by a white person in the UK, households of Indian descent have 90–95p, of Pakistani descent have around 50p, of Black Caribbean descent around 20p. Those of Black African descent and of Bangladeshi descent have a measly 10p. This matters. Wealth and income are what determine our security, leading to better health outcomes and a longer life.
The sad truth is that our tax system was built in a way that props up wealth inequality, and so is a driver of racial injustice. The huge disparity of wealth between white and BAME communities is entrenched by the UK approach to tax, which favours the wealthy, including white families whose wealth originates in slavery and empire.
Fair taxation is one of the building blocks of our communities, in part because it supports investment in public infrastructure and services that we all rely on. Over the last ten years the political decision to shrink the deficit by cutting services, rather than raising taxes, has had a devastating impact, with BAME women being hit the hardest of any group.
Academics in the US have done a great job at understanding the links between the tax system and racial inequality. Last month, Brakeyshia R. Samms, a self-described “Unapologetic Fiscal Policy Wonk," set out on Twitter a long list of American research on this dynamic. American academics have undermined the idea that the tax system is somehow neutral on racism and put forward concrete suggestions for reform.
In the UK we are much further behind, so the full picture is much harder to see as there is an almost total lack of research on the racialised dynamics of the tax system.
It’s not just how the system is set up and operates, it’s also about those within the system. As with many industries, there is still an unacceptable level of discrimination within the tax profession. In an article in International Tax Review, one senior international tax manager is quoted as saying: “There were three or four black people within the transaction tax group and we were never promoted. Eventually we left the Big Four [the leading global accounting firms] because we were never ever getting promoted”.
The Black Lives Matter protests around the world have brought much needed attention to structural racism and racial inequality. It’s important now for all those working on the economic system to ensure racial justice is a key part of our work. Politicians who would usually ignore the issue are taking notice, and so this is an opportunity to take forward our collective vision for economic justice.
At Tax Justice UK, we’re campaigning for higher taxes on wealth to support more investment in public services and tackle historic inequalities. We want to create a fairer, and more equal, world, that lifts everyone up. We reject the notion that the raising and allocating of government resources places any groupings in conflict with each other. This is because structural inequalities intersect so that, for example, justice for black and minority ethnic people cannot exist without justice for disabled black and minority ethnic people, and justice for women cannot exist without justice for trans women.
This isn’t just about which campaigns we run, it’s also about leadership. The mainstream tax justice movement in this country is very white, male and middle class. This has to change. We need to recognize the historic work on economic justice that has been led by communities of colour, and build our campaigns alongside them. We definitely don’t have all the answers, and we know that we have to listen and reflect more, as well as work harder to incorporate racial justice into our approach in a way that is rooted in accountable practices with these communities.
A first step is to understand what research is happening in the UK on the links between the tax system and race and what questions need to be explored further. We’re hoping to work with Tax Justice Network and Decolonising Economics on this.
Ultimately we won’t be able to achieve the world we want, with high quality public services, economic and social justice, without dramatically changing the way in which the tax system perpetuates racism.
We want to thank Guppi Bola from Decolonising Economics and Naomi Fowler from Tax Justice Network for their contributions to this blog.
Image credit: James Broad
The government is proposing to introduce a number of freeports around the UK. While there has been limited information provided on the specifics, the proposal is to have zones with lower taxes and regulatory standards. Tax Justice UK is deeply concerned that this would create micro tax havens dotted across the British countryside and fail to spur any new economic development.
Read our full response to the government's consultation. This response was supported by War on Want and the Women's Budget Group.
This blog originally appeared at the CLASS think tank.
Today Rishi Sunak announced a £30bn package to support jobs. This is on top of £160bn in spending already announced to deal with the crisis.
In usual circumstances this would be a lot of money, especially from a Conservative chancellor. But many have already questioned whether it’s enough given the scale of the economic turbulence we’re facing. The Labour shadow chancellor Anneliese Dodds dismissed it as “barely touching the sides”.
As well as more spending, Sunak revealed £8bn of tax cuts. Firstly, he has cut stamp duty on houses worth less than £500,000 until next March. This is an expensive policy, coming in at £3.8bn. The main result is likely to be higher house prices, as opposed to helping people get on the property ladder or doing anything for renters. It appears that the cut is structured in such a way that property investors and those buying second homes will also benefit. Shelter estimates that up to 230,000 people face eviction when the Covid-19 ban on evictions is lifted in August. Stamp duty is a bad tax, but this cut does very little to solve the broader problems with the housing market.
Secondly, the chancellor has cut VAT from 20% to 5% for six months for the hospitality sector. The impact of this is more nuanced. It’s likely to put more cash in the pockets of hard hit businesses who are struggling and have spent money on making their premises suitable for social distancing. This is good.
However, the big barrier to recovery for cafes, restaurants and hotels is people holding back from spending because of fear of catching coronavirus. While infections are still relatively high, and a second wave is possible, it’s hard to see things returning to normal.
Today demonstrated that there is a new consensus emerging in favour of higher government spending. The Prime Minister has repeatedly claimed that “austerity is over”. We must hold him to this promise. This means we’ll need a public conversation about how to support a bigger state. As Anneliese Dodds pointed out in her response to the budget announcements, tax rises in a recession are a bad idea as they dampen demand.
But in the long run, higher taxes are on the cards. As I argued in the Huffington Post this morning, politicians should look to taxing wealth as part of the solution. In the UK, wealth inequality is double that of income inequality, and we under-tax wealth. That’s why Tax Justice UK, along with 16 other organisations, are calling for ambitious tax reform to support a fairer and greener future.