One of the UK’s most powerful union leaders is piling pressure on Labour to back higher taxes on wealth.
This week Paul Nowak, general secretary of the Trade Union Council’s (TUC), suggested that a “modest tax on the wealthiest 0.3 per cent of individuals” could raise £10bn a year for public services. Nowak said: “Labour have already set out what they’ll do on clamping down on non-doms… But we think that conversation needs to go further.” “With living standards plummeting, public services on their knees, and rampant wealth inequality blighting every corner of the country . . . fair taxation must be a key part of a wider set of policies to help reset the economy to work for working people.” We can convince Labour The TUC and its constituent unions represent millions of workers, so Labour will not be able to easily ignore Nowak’s comments. The public supports what Nowak is saying. New polling shows that 61 per cent of people support higher taxes on wealth. If Keir Starmer and Labour make it into office at the next general election, they will face public services in an existential crisis. To truly stop the slide, Labour will need to spend more on public services. According to the party’s own rules, this will probably mean higher taxes. Raising income tax, or other taxes on ordinary households, will be politically difficult – and highly unfair during a cost of living crisis. Wealth taxes on the super rich, those who can afford to pay a bit more, will be one of their only options.
A crisis is gripping our country’s schools. More than 100 have been told to fully or partially close. There are concerns that school buildings are unsafe because of a construction material that can degrade over time – especially when not maintained properly.
The government was warned several times about the existence in schools of this material; and they scrapped a plan to refurbish all secondary schools when they came into office. Coming home to roost The crisis is a part of an endemic problem in the UK. Years of government underinvestment in public services has left us with crumbling schools and record NHS waiting lists, to name just two of the problems we face. Insufficient government funding is pushing our society to the brink – and crises caused by underinvestment will only increase in the coming years. Two weeks ago, the IFS put it bluntly: the UK faces a stark choice, either raise taxes, or face the decline of public services and the end of the welfare state as we know it. At Tax Justice UK we campaign for the first option. We want to see new wealth taxes levied on the super rich (those with net assets over £10m) – and existing taxes like Capital Gains updated so the super rich pay the same tax rate as working people. Wealth taxes gaining support We're making big strides towards these goals. This week over 300 millionaires, business people and celebrities demanded G20 countries intervene to stop the ballooning wealth of the super rich. A full list of the signatories – including businessman Ian Gregg, film producer Richard Curtis and musician Brian Eno – can be found here. And in a series about the future of government and state spending this week, the Financial Times said higher taxes on wealth look to be increasingly likely. Not only do we need wealth taxes to support long-term investment in public services, we also need them to help struggling households through the immediate cost of living crisis. New research we helped produce shows the public think neither the Conservatives or Labour are promising enough to tackle the cost of living crisis. And the next election will be swung by whichever party can propose the best solutions to it.
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The cost of living crisis will swing the next general election. As the summer ends, political parties are gearing up for an impending general election. We may not know exactly when it will happen, but the issues it will be fought on are becoming clearer. The Bottom Line: How Bold Action on the Cost of Living is Key to the Next Election, a new report from the steering group of Stop the Squeeze (a coalition of 50 civil society organisations, including Tax Justice UK, campaigning for structural solutions to the cost of living crisis), sheds new light on a crucial one. The report sets out to discover what voters, and especially key swing voters, are hearing from the parties, how they are responding, and the kinds of messages and policies on the cost of living crisis that might sway them in 2024.
How to win over swing voters on the cost of living. The voter group dubbed 'Stevenage Woman’ (or ‘Disillusioned Suburbans’) by the think tank Labour Together will be particularly important in the next election. Representing 21.8% of the electorate in England and Wales, these voters are particularly well represented in the East of England, in London’s suburbs, and in the North East and West. They are young, economically insecure, worried about their finances, and unlikely to own their own homes. They are not highly politicised, but are generally socially conservative while leaning left on the economy. How this group votes will decide which party wins the next general election. As Labour Together say: “A working majority depends on Labour’s ability to convert their current support amongst Disillusioned Suburbans into votes at an election.” So how can political parties win over these crucial voters?
Five years ago we asked politicians, academics, campaigners and journalists what was the biggest thing that needed fixing with the UK’s tax system.
Almost without fail they responded that the UK doesn't tax wealth enough. They complained that the issue wasn’t even discussed outside expert circles. At the time there was almost no debate in the media or in politics about taxing wealth more. In five years things have changed dramatically – and we helped do that. We’ve moved the dial Celebrities now go on TV and radio to promote paying more tax, while politicians and journalists openly discuss wealth taxation. Last week for example, filmmaker Richard Curtis told BBC R4’s PM programme that he, as a wealthy person, was in favour of paying more tax to fund the NHS and public services. While the presenter of the BBC’s flagship political show Politics Live, Jo Coburn, said wealth taxes were “raised all the time” on the show. A week of wealth tax calls And Jo Coburn was right: wealth taxes were called for on Politics Live no less than three times last week. On Monday Christina McAnea of the union UNISON made the case for taxing wealth more to fund our public services. Then on Tuesday, Caroline Lucas MP asked “why don’t we have a debate on a wealth tax?” On Wednesday it was Paul Nowak from the TUC’s turn to make the case that the super rich should pay more tax. He set out his thoughts in a piece in the New Statesman co-authored with Patriotic Millionaire Julian Richer. On the same episode of Politics Live, presenter Jo Coburn pushed Labour shadow health secretary, Wes Streeting, asking: “is Labour really going to look at wealth taxes to pay for further investment in health?” This sort of debate would be unimaginable just a few years ago. And we’ve made that happen. Our research and appearances on TV and radio have moved the dial on wealth taxes – making them acceptable for politicians to countenance, and journalists to discuss with seriousness. Tax can help us build a fairer future We’ve come a long way in five years. But there’s still a lot to do, and we need to keep up the pressure. Our public services are at breaking point – the NHS is struggling to keep up with demand and needs serious investment to meet the needs of the future. While inequality grows every year, most people are becoming poorer through the cost of living crisis – while the rich sit back and watch their wealth balloon. At the same time we face a climate emergency – which will disproportionately affect the world’s poorest. All three of these challenges must be addressed through serious investment. If we are to be a fair and just country, that money must come from those with the broadest shoulders. It must come from taxes on the super rich. We’ve made huge strides over the last five years, making wealth taxes a possibility, openly discussed by politicians and journalists. We’re going to keep pushing, fuelling the media debate and convincing politicians to get behind wealth taxes.
Fairer taxes can help us build a brighter future.
A future where inequality is in retreat; where we’re tackling environmental breakdown; where our public services are properly funded to serve us well and our democracy is thriving. I’ve written more on our vision for a fairer tax system and why it matters here. But other changes – beyond reforming our tax system – are needed too. That’s why we work with other organisations who are campaigning in their own areas for a better future. More democracy, less inequality We have teamed up with Compass, an organisation which campaigns for democractic reform. We are supporting their call for a fairer and more democratic voting system in the UK. Our existing voting system tends to amplify the voices of a relatively small number of people. At the same time many millions on the margins of our society are ignored by the big parties. We believe this contributes to the great economic inequality we see up and down the UK. Compass’s report Winner Takes All: Why Economic Justice Now Rests on Democratic Justice sets out how our flawed voting system is contributing to high levels of inequality. Why? Our existing voting system tends to amplify the voices of a relatively small number of people, while many millions on the margins of our society are ignored by the big parties. This contributes to the great economic inequality we see up and down the UK, where certain areas and certain groups who politicians listen to do very well, while others flounder. That’s why we’re sponsoring a petition with Compass, along with the Equality Trust and The 99%. We’re asking the government and MPs to change the voting system to help tackle poverty and inequality. If you agree, you can sign the petition here. If we had a system where each vote carried the same importance – regardless of where it was cast – our democracy would be refreshed, and our politicians would serve us all better. A flourishing democracy goes hand in hand with an economy that works for everyone.
The official gap between the amount tax owed and what the government collects, has grown to £36 billion, new HMRC figures show.
The “Tax Gap” difference between the amount of tax that should be collected and the amount actually collected, grew from £30.8 billion in 2020/21 to 35.8bn in 2021/22. At the same time £1.5 billion went uncollected from wealthy people subject to self-assessment. Tax Justice UK Head of Advocacy and Policy, Rachael Henry, said: “The tax gap remains large and it’s worrying to see the amount of money uncollected from wealthy people continue to rise. “At a time when public services are on their knees it’s vital we are collecting all the tax revenue we can. HMRC inspectors are worth their weight in gold and the government needs to give HMRC the resources it needs to collect these outstanding tax revenues.”
Inheritance tax is a tricky subject that stirs up a range of emotions. In part this is because it is paid by families who have just lost a loved one.
It also whips up feelings that get to the heart of what wealth and work mean to people. Successive governments have told families that they must be self-reliant and look to their own resources, not the state’s. For many families, this means that wealth and inheritance are synonymous with financial security. Security against having no pension, or the costs of social care. It’s no surprise that inheritance tax elicits strong feelings. But despite scare stories in the newspapers suggesting that the tax is deeply disliked, the reality is much more mixed. That’s the key finding from a fascinating piece of research by our friends at the think tank Demos. They surveyed 2,000 Brits and found that up to three quarters backed some form of inheritance tax. Just 21% of people said all inheritances should be tax free. We support inheritance tax According to the research, there are high levels of support for charging inheritance tax on the super-rich, second homes and financial assets. This is good news, especially given that elements of the media and right wing politicians have declared they want to get rid of the tax ahead of the next general election. We support maintaining inheritance tax for many reasons (though we do accept that it needs reform). Below are 5 facts about inheritance tax that inform our view: 1. Most families don’t have to pay it Just 3.8% of estates pay any inheritance tax. A generous system of allowances means that no inheritance tax is paid below a certain level of wealth. For example, a married couple can hand over a million pound family home to their children and grandchildren tax free. 2. The super-rich already benefit from inheritance tax loopholes, scrapping the tax would make them richer. Tax Justice UK research exposed how a small number of multi-millionaire families benefit from tax loopholes to pay lower rates of inheritance tax than families who are less wealthy. Scrapping the tax entirely would make those multimillionaire families even better off. We think this is wrong. At a time when services like the NHS are on their knees we should be scrapping giveaways to the wealthy, not giving more money away to them. 3. Scrapping inheritance tax would leave a £7 billion gap in our public services. When you ask ordinary people if they support tax cuts even if it means cuts to public services, the answer is a clear: “No”. Inheritance tax is one of the few taxes on wealth we have that helps pay for things like social care, the NHS and education. When politicians call for IHT to be scrapped, we should be asking them which care homes they’re prepared to close, how many nurses they are prepared to sack and how many schools they are willing to close to fill the £7 billion hole it would create. 4. Wealth inequality is a ticking time bomb for inequality, scrapping inheritance tax will make it worse Research by the Institute for Fiscal Studies has highlighted the effect of growing inheritances in deepening the UK’s stubbornly entrenched wealth inequality. The Resolution Foundation argues that we will reach ‘peak inheritance’ by 2046, when the value of inheritances is expected to be more than two-fold that today. This will further entrench inequality within younger generations, between those that have parents who own homes and those that do not. Birthright should not be the primary arbiter of wealth. 5. We need to fix inheritance tax, not scrap it Inheritance tax needs fixing. One way of reforming it would be to change the focus so that it is paid by the person receiving a transfer of wealth. The Institute of Public Policy Research think tank has suggested that everyone should be able to receive £125,000 tax free over their lifetime. Only once this level is reached would someone start to pay tax on transfers. A lifetime receipts tax like this would be much fairer than the status quo. We are clear that inheritance tax should be kept in some form. However, as Demos’ research hints, that will require reasoned, honest dialogue with the public about how the tax works and what it pays for. That starts with leadership and a willingness by politicians to stand up for the positive role that tax plays.
The answer may surprise you. Despite making a £222 million profit, Amazon's main UK division paid no corporation tax in 2022.
Because of government tax breaks, this is the second year in a row that this part of Amazon has paid no corporation tax here. In fact the UK government actually gave Amazon money last year: £7.7m in tax credits for making investments in infrastructure, which they likely would have made anyway. This would be an appalling situation at any time – but during a cost of living crisis when our public services are crying out for better funding, it’s an outrage. That’s why we’re taking action. We’ve teamed up with 38 Degrees to demand the government scraps tax breaks for Amazon – and other huge corporations. They must close tax loopholes and stop handing out subsidies to tech giants that don't need them. Sign the petition: Stop tax breaks for Amazon Summing up the dire situation, Paul Monaghan chief executive of our ally the Fair Tax Foundation told The Guardian: “Amazon UK Services is not only not paying tax, but is being handed tax credits for investment that almost certainly would have happened anyway. Tax credits for old rope, if you will. Amazon workers strike At the same time Amazon is resisting giving it's staff proper cost-of-living wage increases. Amazon workers in Coventry are currently on strike, demanding their wages increase from £11 to £15 an hour. Amazon workers in other locations are currently balloting to strike. Big multinational corporations like Amazon must be made to contribute to the UK through taxes – and paying their workers properly. They must not be given a free ride by the UK government.
We’d raise £22 billion a year if we taxed the assets of the UK’s 350 richest families at 2%.
It’s a proposal we pushed in the media this week after the Times Rich List revealed the wealth of the super rich continues growing. We worked jointly with the New Economics Foundation and the Economic Change Unit to do the research. The £22 billion that could be raised would be enough to fund the construction of 145,000 new affordable homes a year. Or pay the wages of nearly a third of NHS staff. The Guardian and Mirror both covered the research, running supportive articles on our case for taxing the UK’s richest families more Our Executive Director Robert Palmer was on BBC News arguing that evidence shows super rich people don’t tend to emigrate if you tax them more.
Wealth taxes have huge popular support: 78% of people in the UK support higher taxes on those who own assets worth over £10 million.
When it comes to convincing politicians, however, the issue of wealth taxes can become more contentious. We asked our readers to send a message to their MP requesting they back wealth taxes. 6,500 emails were sent to over 98% of MPs. (You can still send a message here). We received some supportive responses from MPs. But many were critical. Negative responses to taxing the super rich more aren’t uncommon. We decided to respond to some of these criticisms – so below we debunk the most prevalent myths around wealth taxes. 1. Don’t the richest already pay the most in tax? Often the very rich will be paying more pound for pound in tax than less well off people, but their tax rate (IE the percentage of their income they pay) will be much lower. For example the top 1% of earners contribute a third of all tax income received by the Treasury pound for pound. However the bottom 10% of earners have an effective tax rate of 44%, which is more than twice as high as those in the top 0.01% (21%). We believe this is unfair. A billionaire should never pay a lower percentage of income tax than the secretary or cleaner in their office. 2. Doesn’t the UK already have taxes on wealth? The UK does have some taxes on wealth but these do a very bad job of ensuring that very rich people pay their fair share. The UK is also lagging behind changes made in many other countries. In Spain, a net wealth tax was implemented in 2011, which has led to an increase in the number of taxpayers and the amount of revenue collected. In the US, President Joe Biden is looking to introduce new taxes on billionaires to invest in green growth, lowering inflation and cutting the US deficit. If just one of Biden’s policies was adopted in the UK - the introduction of a tax on ‘share buybacks’ - we could raise an extra £2 billion a year, according to the think-tank IPPR. 3. If wealth taxes are increased, won’t rich people just move abroad? Studies have shown that most wealth holders who live in the UK have ties here, want to be here, and want to contribute as citizens. Tax levels are a minor factor in their decision to relocate in comparison to factors such as family and social ties, schooling, and overall economic stability. Our tax proposals would only lead to a very small amount payable relative to the net worth of people’s assets. For example, the 1-2% tax would only apply to assets above the £10 million threshold. It would not tax assets below the £10 million threshold. This would mean someone with £11 million in assets would only pay £10,000 - £20,000 a year, because they would only be taxed on their assets between £10 - £11 million, not on anything below £10 million. Existing evidence on reform of the non-dom status showed that increasing taxes on the super-rich led to a minimal number of individuals leaving the UK. Reforms in 2017, which restricted access to the non-dom regime, led to just 2% of those who had been in the UK for fewer than 3 years leaving, the number was significantly lower for those with longer- term ties to the UK. 4. In Norway, wealth taxes have lead to the rich fleeing the country The recent experience of a marginal increase in wealth taxes in Norway has led to some misleading and hyperbolic media reports that the rich are fleeing. Of 236,000 millionaires and billionaires in Norway, the relocation of 30 – while substantially higher than in previous years – still amounts to a mere 0.01% of Norway’s millionaire and billionaire population. The lost revenue from the leaving millionaires comprises a small percentage of the revenue gained from the increase. For any substantial cost to the economy to occur, academics Arun Advani and Andy Summers, have estimated that the migration response would have to be more than 15 times larger than this. 5. Can’t the rich just voluntarily pay more tax if they would like to? This misses the fundamental point that tax is designed to raise revenue for shared, public services. If just a few opt to pay more, it would not provide the level of investment our public services and economy so urgently need. It’s also about fairness. Why should one group get to decide if they want to pay tax – while others don’t have that choice? Workers, for example, can’t decide if they want to pay income tax. It is the government's responsibility to create a fair tax system that is compulsory, not voluntary. 6. The 2020 Wealth Tax Commission said that introducing a wealth tax in the UK would be hugely complex, and that instead of an annual wealth tax, the government should reform existing taxes on wealth. This isn’t quite correct. The Commission made various recommendations, none of which precluded the feasibility of an annual wealth tax to act as a solution for ongoing structural inequality and long-term public financing. The Commission was assembled to assess wealth taxes as a solution to the public finance crisis left by COVID-19. In this context, the Commission recommended a one-off wealth tax would be simpler and more efficient to implement than an annual wealth tax, as a solution to the COVID-19 crisis. This is because a one-off tax is an exceptional response to a particular one-off crisis. The Commission also recommended a package of reforms to existing wealth taxes as a priority, including capital gains, inheritance tax and council tax, since the existing system is complex, dysfunctional and unfair. And it also concluded an annual wealth tax would be feasible in addition to these measures, and also the best mechanism if the aim was to specifically reduce inequality. Fixing existing taxes or levying a one-off tax will not rebalance long-term structural inequality. Additionally, setting a very high threshold for an annual wealth tax makes it vastly easier to administer. At a £10 million threshold, it would only affect 0.04% of the population – approximately 20,000 individuals. 7. We have the highest peacetime taxes in the country’s history, we can’t raise taxes anymore. The level of taxes in the UK is about average compared to similar countries. Many European countries have much higher levels of tax than the UK. At Tax Justice UK, we don’t want to raise taxes on working people. We want to raise taxes on super rich people who derive their income from wealth. The effective tax rate on working people is the highest it’s ever been, while the richest in our society, whose wealth is ballooning by tens of billions of pounds every year, pay a much lower tax rate. For example, Rishi Sunak, who earned nearly £2 million in 2021-22, has an effective tax rate of 22%, while an average doctor in London pays 40% in tax. This is because taxes on income from wealth are much lower than taxes on work, and the Prime Minister made most of his income from returns on dividends and capital gains. In this context, the government has chosen to increase taxes on working people (by freezing income tax thresholds) rather than looking to the wealthiest. In fact even the wealthiest pay very different rates of tax, depending on the source of their wealth. A study found, the average person earning more than £2 million had an effective average tax rate of 40%, while the average person with total remuneration of £10 million from capital gains, has an effective tax rate of just 21%. It’s even unfair for the super-rich! 8. We don’t need more taxes. Taxes already fund public services adequately. The majority of the British public would disagree with this statement. The state of the NHS is the third most cited public concern currently, running behind the economy and inflation. Polling from October 2022 found that a third (34%) of the public thought taxes and spending on public services should remain at current levels, while 26% thought there should be an increase in tax to increase funding. Only 22% said that taxes should be reduced and less spent on public services. 9. Inequality in Britain is not something to be concerned about The UK has a very high level of income inequality compared to other developed countries. We are the second most unequal country in the G7 and one of the most unequal countries in Europe. Vast levels of wealth inequality are destabilising for society and democracy and the majority of people in the UK are concerned about it - recent polling from the Fairness Foundation found that seven in ten are concerned about a society in which some have wealth of over £10 million while others live in poverty. Inequality in the UK has been high since the 1980s, with the share of income earned by the top rising, peaking at 14.7% in 2007 before the financial crisis. This is almost double the corresponding figure for Belgium (7%) and still higher than Australia (9%), Sweden (8%) and Norway (8%), to name a few. Wealth in Great Britain is even more unequally divided than income. In 2020, the ONS calculated that the richest 10% of households hold 43% of all wealth. The poorest 50%, by contrast, own just 9%. The wealth gap has reached record levels, thanks primarily to the appreciation of assets such as property, relative to the decline in household incomes. 10. Wealth taxes would be bad for the economy and business There are many compelling arguments that higher taxation of wealth in the UK could contribute to a more dynamic economy and stimulate growth, and that extreme concentration of wealth has damaging economic effects. Investments made by the super-rich tend to be less productive than those made by working people. Investing in share buybacks and dividends, for example, diverts financial resources away from the ‘real’ economy and reduces productive investment. With the UK having suffered decades of low productivity and wage stagnation, an increasing number of academic studies are finding that fairer taxation of wealth is a path to a healthier and more dynamic economy. Redistribution can create a healthier economy in which working people have more financial freedom, thus raising demand for goods and services and benefiting British businesses and high streets. Tax Justice UK has set out how six changes to taxes on wealth could raise £50 billion annually to invest in health, education, research and development, and national infrastructure, creating a healthier and happier workforce and encouraging productivity growth. 11. Billionaires create jobs (e.g., Amazon has over 1 million employees). Will they stop doing so if we tax them? High taxes on corporations and the wealthy existed side by side with record-high levels of job creation and increases in standards of living across the developed world for 50 years. The top rate of corporate tax in the US averaged above fifty per cent in the 1950-1960s. Furthermore, slashing taxes means that governments have much less to invest in the economy, which itself stunts job creation. Many thousands of teachers, nurses, firefighters, and scientists cannot be hired when the super-rich do not pay their fair share in taxes. 12. If a wealth tax didn’t work in France, why would the UK be any different? France’s wealth tax is often cited as an example of why wealth taxes don’t work. The French wealth tax was in place until 2017 when it was abolished by current President Emmanuel Macron and replaced with a similar tax on property, not business or shares. It has been noted that the previous wealth tax did not raise significant revenue - just 5 billion euros in 2015 which was less than two percent of France's tax receipts. The tax implemented in France is vastly different to the policy we at Tax Justice UK propose for the UK. The French tax had a low threshold, with households with assets in excess of €1.3 million liable. Whereas the policy recommendation for a UK wealth tax sets a very high £10 million threshold. This limits the number of people that would need to pay the tax - in the UK it would only be 20,000 individuals compared to 343,000 households in France - which makes it far less complex for HMRC to administer. Setting a high threshold also allows exemptions to be limited. This was a significant issue in France, where badly designed loopholes enabled avoidance and limited the tax’s revenue potential. It is also worth noting that the repeal of France’s wealth tax prompted backlash from a significant part of the population, and the reinstatement of the wealth tax was one of the main demands of the ‘gilets jaunes’. |
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