Rishi Sunak must avoid ‘soak the rich policies’ and raising taxes, instead he should focus on growth in next month’s Budget, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.
The warning from Nigel Green, the chief executive and founder of deVere Group comes ahead of the Institute of Financial Studies, the influential think tank, on Tuesday calling on the Chancellor to continue supporting businesses during the UK’s economic recovery from lockdown.
It also comes as The Wealth Commission urged the Treasury on Monday to introduce a one-off wealth tax to help plug the gap in the government’s coffers caused by the historic spending to help combat the impact of the pandemic.
Mr Green says: “The IFS is absolutely right to raise the alarm to Rishi Sunak about raising taxes as he reportedly eyes changes to capital gains tax, corporation tax, and pension tax relief for high earners.
“Now is certainly not the time for putting further pressure on job and wealth-creating businesses and individuals.
“It might further curtail investment and demand at the very time the country needs it most to rebound from the worst recession in 300 years.
“The Chancellor should be implementing policies for long-term, sustainable economic growth, rather than taxing it into the ground.”
He continues: “In addition, the proposal set out by The Wealth Commission on Monday to introduce a one-off wealth take is misguided for two key reasons.
“First, as the plans demand that main homes and pensions would be included in a one-off wealth tax, not just the super wealthy would be dragged into this wealth raid.
“It could force many households who are asset but not cash rich into debt.
“Second, history teaches us that ‘soaking the rich’ is a poor idea. The people these policies intend to target, typically, have the resources to move to lower tax jurisdictions if the tax burden becomes too great. They are internationally mobile.
“We saw this happen when France tried to launch a wealth tax, the ultra high-net-worth moved elsewhere.
“When this happens, government finances suffer considerably because they contribute a disproportionately large amount to the state’s coffers, plus they provide jobs and boost investment.”
There is an argument that if the government is serious about having the better-off pay more tax, they should cut rates further and allow them to become wealthier. This would, say some commentators, incentivise top achievers, who prop-up ‘The System’, to remain in the UK.
“However, I suspect that implementing this philosophy would be political suicide in the current climate,” says Mr Green.
The deVere CEO concludes: “I would urge the Chancellor to reject calls for a one-off wealth tax and, for the time being at least, listen to the IFS, avoid raising taxes and focus on growth and support policies.”