The concept of a wealth tax has raised its head – but once more – as the federal government makes an attempt to stability its books.
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2:19
Lord Kinnock requires ‘wealth tax’
Sir Keir Starmer’s spokesman stated: “The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”
Whereas there has by no means been a wealth tax within the UK, the notion was raised below Rishi Sunak after the COVID years – and rejected – and each Harold Wilson’s and James Callaghan’s Labour governments within the Seventies severely thought of implementing one.
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Will Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer impose a wealth tax? Pic: PA
What’s a wealth tax?
A wealth tax is geared toward decreasing financial inequality to redistribute wealth and to lift income.
It’s a direct levy on all, or most of, a person’s, family’s or enterprise’s complete internet wealth, quite than their earnings.
The tax usually consists of the whole market worth of property, together with financial savings, investments, property and different types of wealth – minus an individual’s money owed.
In contrast to capital beneficial properties tax, which is paid when an asset is offered at a revenue, a wealth tax is generally an annual cost based mostly on the worth of property owned, even when they aren’t offered.
A one-off wealth tax, usually used after main crises, may be an choice to lift a considerable quantity of income in a single go.
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1:51
Wealth tax can be a ‘mistake’
How may it work within the UK?
Advocates of a UK wealth tax, together with Lord Kinnock, have proposed an annual 2% tax on wealth above £10m.
Wealth tax marketing campaign group Tax Justice UK has calculated this may have an effect on about 20,000 folks – fewer than 0.04% of the inhabitants – and lift £24bn a yr.
Due to how few folks would pay it, Tax Justice says that may make it simple for HMRC to gather the tax.
The group proposes folks self-declare asset values, backed up by a compliance crew at HMRC who may have a register of property.
Which nations have or have had a wealth tax?
In 1990, 12 OECD (Organisation for Financial Co-operation and Improvement) nations had a internet wealth tax, however simply 4 have one now: Colombia, Norway, Spain and Switzerland.
France and Italy levy wealth taxes on chosen property.
Colombia
Since 2023, residents within the South American nation are topic to tax on their worldwide wealth, however can exclude the worth of their family as much as 509m pesos (£92,500).
The tax is progressive, starting from a 0.5% charge to 1.5% for probably the most rich till subsequent yr, then 1% for the wealthiest from 2027.
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Bogota in Colombia, which has a wealth tax
Norway
There’s a 0.525% municipal wealth tax for people with internet wealth exceeding 1.7m kroner (about £125,000) or 3.52m kroner (£256,000) for spouses.
Norway additionally has a state wealth tax of 0.475% based mostly on property exceeding a internet capital tax foundation of 1.7m kroner (£125,000) or 3.52m kroner (£256,000) for spouses, and 0.575% for internet wealth in extra of 20.7m kroner (£1.5m).
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Norway has each a municipal and state wealth tax. Pic: Reuters
The utmost mixed wealth tax charge is 1.1%.
The Norwegian Labour coalition authorities additionally elevated dividend tax to twenty% in 2023, and with the wealth tax, it prompted about 80 prosperous enterprise homeowners, with an estimated internet price of £40bn, to depart Norway.
Spain
Residents in Spain must pay a progressive wealth tax on worldwide property, with a €700,000 (£600,000) tax free allowance per individual in most areas and houses as much as €300,000 (£250,000) tax exempt.
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Madrid in Spain. Greater than 12,000 multimillionaires have left the nation since a wealth tax was elevated in 2022. Pic: Reuters
The progressive charge goes from 0.2% for taxable earnings for property of €167,129 (£144,000) as much as 3.5% for taxable earnings of €10.6m (£9.146m) and above.
It has been reported that greater than 12,000 multimillionaires have left Spain for the reason that authorities launched the upper levy on the finish of 2022.
Switzerland
All the nation’s cantons (districts) have a internet wealth tax based mostly on an individual’s taxable internet price – totally different to complete internet price.
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Zurich is Switzerland’s wealthiest metropolis, and has its personal wealth tax, as do different Swiss cantons. Pic: Reuters
It takes into consideration the stability of a person’s worldwide gross property, together with checking account balances, bonds, shares, life insurances, vehicles, boats, properties, work, jewelry – minus money owed.
Switzerland additionally works on a progressive charge, starting from 0.3% to 0.5%, with a comparatively low place to begin at which individuals are taxed on their wealth, akin to 50,000 CHF (£46,200) in a number of cantons.
