After a huge £280bn were spent by the government due to the colossal coronavirus expenses, £230bn more than what the government’s estimated expenditure for the pandemic was at the beginning, the British government is now finding itself in a position of nowhere to look but up. Dr Arun Advani, an assistant professor at the University of Warwick said, “We’re often told that the only way to raise serious tax revenue is from income tax, national insurance contributions, or VAT. This simply isn’t the case, so it is a political choice where to get the money from, if and when tax rises.” The Institute of Fiscal Studies also reported that the bottom 10% of earners were most likely to have jobs in sectors that have shut down or can’t work from home. Hence, it was proven that it would be too hard on people if income taxes were raised generally.
The idea of a 1% tax increase on wealthier people came from the Wealth commission and had been passed before in Argentina and in countries such as France and Japan after the Second World War. As well as the experience of doing this before and the insurance of its success, it also wouldn’t discourage economic activity, a vital part of the bounce back from the coronavirus pandemic. It’s righteousness as a fair solution was also emphasised by leaders too such as Rebecca Gowland from Oxfam stating: “It is morally repugnant to allow the poorest people to continue to pay the price for the crisis when it is clear that a fair tax on the richest could make such a difference”.
However, this idea has been denied as fair by many too due to the economic concerns it raises for people who may be taxed this. For example, Madsen Pirie, president of the Adam Smith Institute free market think tank said “Your cash in the bank is not…gathering dust, it is invested. If we tax those investments we end up with less produced, less produced means lower wages and lost pensions, that means a worse life for all of us.” This tax also may mean that people are moving their money elsewhere, including destinations abroad. At this time, the best solution may not be to lose money from the country but get it flooding in. Should the government rethink their decision then?
The Treasury summed up the argument concisely, by saying that ‘those with the most should contribute the most’ and hence this tax would be part of an ‘efficient tax system’.
