UK Chancellor Rachel Reeves faces increasing fiscal pressure amid rising borrowing costs which is challenging the budget borrowing limits. With Labour government having ruled out both, further tax increases and further spending cuts, alternative revenue sources are under scrutiny. Campaigners propose taxing the super-rich to raise funds without affecting working families, though critics warn this could accelerate the departure of wealth to lower-tax jurisdictions.
The UK has never implemented a wealth tax, though it has been explored in previous decades. Proposals from groups such as Tax Justice UK include a 2% tax on assets over £10 million and reforms to capital gains tax, national insurance, and inheritance loopholes. While similar taxes exist in countries like Norway and Switzerland, they have been repealed elsewhere due to the limited revenue, high administrative costs and the risk of capital flight.
International evidence and expert opinion suggest wealth taxes are often economically inefficient (wealthy taxpayers simply relocate to other country without wealth tax) and difficult to administer (how exactly to determine chargeable assets?). Hence, reports from the OECD and the UK Wealth Tax Commission recommend reforming existing taxes over introducing new wealth taxes as the reduced investment, lower growth and tax avoidance pose significant risks.
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