The main, but not only, criteria for a levy to be seen as successful will be that it raises a significant sum for the Exchequer. To achieve this the levy needs to be seen as fair and not over punitive to those who have generated wealth or a disincentive to those who are seeking to generate new wealth. For the levy (or tax; it is a tax) to be fair several features must be incorporated into the structuring of the levy:
– Key to the proposals being supported and being seen as fair and acceptable by those who will be contributing most, is that it applies to all British citizens and their families whether they live mainly onshore or offshore. No wealthy individual who has decided to remain onshore for tax purposes is going to regard it as fair or reasonable for them to be taxed if British citizens and their families who have moved offshore to avoid UK tax are not subject to the levy. There are a large number of offshore British subjects who fall into this category many of whom are high profile, have benfitted immensely from succesful businesses founded in the UK and who are very wealthy and who can and should make a significant contribution.
– the wealth threshold at which the levy should apply should be high if the incentive to wealth creation is not to be diminished. It is suggested that this threshold should be £50 million. The levy would only apply at or above this level.
– the assessment of individual and/ or family wealth would be determined by a panel of several experts and not just HMRC and/ or the Government. The panel would include for example the compilers of the Sunday Times Rich list and other private sector experts and credible compilers of relevant data. The assessment of individual, family or trust worth would be decided by this panel by consensus. In the event of disagreement amongst the panel a high ranking tax Counsel or Judge would ultimately be responsible for determining the wealth of an individual, his or her family or family interests.
– as indicated the levy would not just apply to individuals but also to their family intetrests if avoidance is to be minimised. Careful thought will be need to be given as to precisely how the levy applies to individuals and their family interests. This is to ensure that there is not a duplication in payments but also that all family interests are included in the wealth assessment so that the levy cannot be avoided by assets being shifted around family members or interests. Whilst this could be made complex to implement and a potential feast for tax lawyers the way to address this is for the Panel (with the final arbiter as above) to be the body that decides the level of wealth and entity to which the levy applies.
– the levy would apply to the interests of any British citizen whose worldwide wealth is over the threshold and who resides in any part of the UK for more than 20 days per annum. This deliberately sets a much tighter definition of domicile and residence than under the current 90 day rules. The 20 day rule would only apply in relation to this wealth levy. The 90 day rule in relation to annual and other tax criteria would not be altered. Current offshore British citizens will have to decide whether they wish to retain their British citzenship and pay the levy or avoid the tax by giving up their citizenship (and any titles that they have obtained through the honours system). Current foreign citizens with honorary British titles would not be subject to such a forfeit or, by definition, the levy.
– the level at which the tax (or levy) is set should depend on whether this is to be a one off levy to help address ‘the Covid deficit’ or if this levy is to become an annual tax. Detailed modelling will be required to assess the maximum amounts that would be raised at different levels of one off or annual levies but it is suggested as a starting point that if the levy is to be a one off event the rate should probably be at or around 1% (£500,000 on £50 million or £10 million on £1 billion). If it is to be an annual levy it should be set at or around 0.375%. On a fortune of £50 million this amounts to £187,500; on a fortune of £1 billion the annual amount would be £3.75 million. In this author’s view an annual levy of as much as half a per cent is too high if it is not to be perceived as punitive and a disincentive to significant future wealth creation and accumulation.
Without the necessary statistics to hand it is difficult to gauge as to how much the above proposals would raise. By way of illustration if there are not less than 1,500 British citizens and families worldwide who meet the £50 million threshold and who, say, have an average wealth of £70 million, the 1% one off levy would raise £1.05 billion and the alternative annual levy would raise nearly £400 million. These amounts are significant but even if they are an underestimate illustrate that these sort of wealth levies do not raise that much for the Exhequer in the general scheme of things. However as indicated as or more important as fumds raised is the issue of addressing Covid related inequalities. These measures also help to tackle the perception and reality that not all British citizens are in this together. Whilst it is vital to remember that the generation of wealth and excellence only come through enterpreneurship and incentive those who have been lucky enough to achieve significant financial success need to, and need to be seen to, give back and contribute to the Country that has helped make them.
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