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Who Pays For COVID-19? Public Offers Its Thoughts, Survey

Editorial Staff

8 July 2020

For governments globally dealing with the economic hole left by the pandemic, revisiting offshore wealth is a tempting, for some, redemptive path. As this publication reported just last week, the total size of all offshore assets in 2019 stood at €10 trillion ($11.3 trillion), based on 84 countries passing each other information under automatic exchange agreements and tracked by the OECD.

While there is no suggestion that offshore wealth is illegitimate, tax regimes around the world are going to be under an unforgiving lens. With Chancellor Rishi Sunak expected on Wednesday to give some indication of how the UK might pay for the crisis, most watchers expect specifics unveiled via a full budget in the autumn.

Meanwhile, accountancy and advisory firm has asked what tax measures the public would like to see. Polling around 1,000 in the UK during late May and early June, it found that a third of respondents wanted the government to borrow more by issuing COVID-19 government loan stock similar to measures used during WW1; another third wanted tax rises across the board; while just 8 per cent had the stomach for cuts or pay freezes in the public sector or reductions in state benefits or pensions guarantees.

While a wealth tax has been forewarned as one way to restock the Treasury, this latest survey may offer some comfort. Just 18 per cent were in favour of a wealth tax, with many taking the view that the wealthy are already taxed highly across the board and as long as they are following the rules, they should not bear the brunt of tax increases, if introduced. And given that these are early days in assessing how deep economic scarring will be, tax hikes are only likely once a true recovery is underway.

Leon Fernando Del Canto, a barrister at Del Canto Chambers is one who believes a wealth tax is misunderstood and not an alien concept to the UK. "If implemented, it will need to be designed in a way that avoids double tax or an excessive levy on taxpayers already paying taxes on similar bases," he said. He argues that countries like Belgium, Italy, Netherlands, Norway, Spain, France and Switzerland have already shown that the impact of wealth tax is minimal.

"The consistency of its application in countries with a strong social consciousness such as Switzerland, Netherlands and Norway shows its utility. Especially in the current situation we are facing where governments and citizens are being called to support the enormous financial crisis we are facing," he said.

Wealth tax will most likely be implemented in some way or the other, and policies that have until recently been considered eccentric, such as basic income and wealth taxes, will have to be in the mix, he added. How to define wealth to be taxed is a tougher one for the UK government to decide.

In BDO's poll, the consultancy found much more unity in pursuing tax evaders at home and abroad to rebuild finances. Given HMRC's limited resources, two-thirds said they wanted the government to act much more forcefully in this area, and a fifth said they would prefer officials to double down on chasing more aggressive tax avoidance that often involves HMRC tracing contrived or artificial transactions, the accountancy firm said.

“People are looking for the government to show that it will deliver on its promise in March," said Dawn Register, partner in Tax Dispute Resolution at BDO, when the Exchequer said it would target those evading and avoiding tax to bring in much-needed additional revenue.

Its target then was to recoup £4.4 billion by 2024/25, but as this poll and the magnitude of the pandemic has made clear, it feels like a drop in the bucket four months on. BDO's Register says those using avoidance schemes may not be "breaking the rules" but are going “against the spirit of them." The firm reckons that there is a £35 billion bounty to unlock by ramping up tax avoidance oversight.

Increasing taxes on consumption was also a popular polling choice, with just over a third wanting duties raised on alcohol and gaming for a start.

Notably, the survey found that less than 5 per cent supported increasing taxes on residential property, again this could be that homeowners have long been penalized by heavy Stamp Duty, Council Tax and possibly Inheritance Tax.