‘Corporations, Foreigners, And Rich People’ Face Wealth Taxes Says Former U.K. Chancellor

Corporations, foreigners, and rich people could be the answer to the £40 billion ($52.7 billion) hole in the U.K.’s public finances caused by the coronavirus pandemic.

Philip Hammond, the former U.K. chancellor says that government borrowing will take the lion’s share of the debt burden until after the next general election in 2024, “supplemented by some token increases on what I call the hated groups: corporations, foreigners, and rich people.

“A windfall tax is almost inevitable. If anybody has done well out of this crises they can expect to be taxed on their gains.”

He was speaking at an event hosted by the Resolution Foundation, which has called for “the biggest reform of wealth taxation in a generation.”

The government should raise corporation tax from 19% to 22%, says the think tank in a report co-authored with the Standard Life Foundation. This is to prevent any post-pandemic recovery being funded by spending cuts and more austerity.

Additionally, it reckons a Council Tax increase of 1% on properties worth over £2 million ($2.6 million) will help the government raise over £1 billion ($1.3 billion).

The Institute for Fiscal Studies says £40 billion ($52.7 billion) needs to be found to balance the U.K.’s books after borrowing spiralled to record highs during the coronavirus pandemic.

Hammond’s comments come a day after the U.K. government’s own Office of Tax Simplification (OTS) suggested increasing capital gains tax (CGT), which is imposed on anybody selling shares, second homes or other assets.

The tax is “counter-intuitive” it says, and should instead be bought into line with income tax, which would mean tripling the number of people currently paying it.

Currently, only 20% of the U.K.’s highest earners pay CGT. But by lowering the tax break from £12,300 ($16,139) to £1,000 ($1,000) an extra £18 billion ($23.6 billion) a year could be raised.

Rishi Sunak, the chancellor, and Hammond’s successor, commissioned the review into CGT in July. However, he is not bound by its recommendations and many in his own party would oppose any such changes.

Wealth taxes have long been a thorny issue in U.K. politics, having been traditionally championed by the left. Previous Labour Party manifestos have outlined taxes on large mansions and gardens.

“For a Conservative government to even consider intervening in this way suggests a party that has lost its mojo,” says Miles Dean, head of International Tax at Andersen. “Aligning gains with income will result in wealthy foreigners shunning the U.K., wealthy Brits leaving and the Conservatives signing their own death warrant.”

With the rich now more mobile than ever, many worry that they will flee the U.K. should higher taxes be imposed on their wealth. This would make any increases in CGT counter intuitive as some of the highest tax payers would leave.

Last year, when the Labour Party ran its election campaign calling for higher corporation and income taxes many U.K. billionaires made plans to leave the country. Two fifths of the CGT already come from those making over £5 million ($6.5 million) annually.

Hammond acknowledges that the U.K. still needs to “retain our attractiveness to international capital,” and this means not only taxing the rich for the cost of the pandemic. “We’re in a world of big taboo. For the last decade or so all talk of tax increases has been couched around increases on others.

“I’m left wondering whether this is an elaborate attempt to convince ordinary taxpayers that we can fight a war or battle a pandemic and convince them we can deal with both the costs of the war itself and the medium-term structural damage that it inflicts on the economy without them having to contribute at all.”