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PwC has slammed politician’s calls for more discussion on a tax on the wealthy, arguing that such a penalty would only damage the UK as a place in which it is attractive to conduct business.
The firm’s comments follow fresh calls to examine a mansion tax from the shadow chancellor, Ed Balls, just days after deputy prime minister Nick Clegg made national headlines with the idea.
Balls went so far as to say he would happily discuss the idea with the business secretary Vince Cable: ‘The likes of a mansion tax need to be on the table to be looked at.’
But PwC’s senior economic advisor, Andrew Sentance, said introducing a new tax on the wealthier in society would undermine steps both recent governments had made to make the UK a more attractive place for business.
‘Given most EU countries that had wealth taxes, abolished them in the 1990s and 2000s, a new wealth tax could look like a regressive step. It would also work against the cut to 45p of the top rate of tax and corporate tax reforms, which has helped signal high earners are welcome in the UK and clearly would also complicate rather than simplify the UK's already over-complex tax system.
‘A wealth tax could only work as part of much broader tax reform, which enabled cuts in other taxes. But the wealth tax would have to be substantial to enable significant cuts elsewhere. Nor will a wealth tax be enough to protect the public sector from cuts. Significant reductions are going to be needed to get spending down to a more sustainable level. A broader review of the tax system would be welcome and is long overdue. There would be an opportunity to overhaul elements which have grown up over hundreds of years and design a system more adapted to supporting enhanced growth for the UK in the 21st century,’ said Sentance.
The UK200 group of accountants and legal practitioners described the debate as ‘parties cosying up to each other in readiness for the next election.’
UK200 tax advisory head, Cormac Marum said that introducing a wealth tax as an on-going fixture in our tax system would prove popular with those who fall below the threshold to pay the new tax.
‘Those above the threshold, and so would have to pay the new tax, are likely to be less keen to say the least. Not surprisingly, most people view tax proposals selfishly and decide their view on how it directly affects their pocket. People are always in favour of other people paying more in tax and against paying more themselves,’ said Marum.
He pointed out that the burden of any wealth tax will not have an equal geographical spread across the UK but will fall disproportionately on London & the South-East of England.
‘Technically, a property tax is easier to collect than taxes on income. Whereas people with income can move abroad or try various types of planning to escape paying tax, property can’t. It is fixed and can have a value ascribed to it fairly easily. For example, collection of the Council Tax on properties has been much easier than collection of the Poll Tax on people,’ said Marum.
David Ingall of JWP Creers, said that a wealth tax, not a mansion tax, might be acceptable but only as part of a balanced taxation system.
‘All Balls is doing is picking a tax that will only affect a small proportion of the populace so there's little downside on lost votes.
‘A wealth tax has its compliance issues that make our current system look like simplicity itself. Another politicians' pipedream, or our nightmare depending where you stand,’ he said.
Source: Accountancy Live
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