Speaker 1: There is an obligational ministers to tell the truth and
Speaker 1: saying that your taxes are in order when you know
Speaker 1: they're not is not telling the truth. There we have
Speaker 1: Dan Needle, who is the founder of Tax Policy Associates,
Speaker 1: and here's the tax expert who made the former chancellor
Speaker 1: and deems Zharwie's tax issue public. He joined Bloombergoli this
Speaker 1: week to wade in on the ongoing drama that's become
Speaker 1: something of a scandal in facts around in the Conservative
Speaker 1: Party chairman and whether he has been truthful about his
Speaker 1: tax affairs. And listening to Dan talking, you could draw
Speaker 1: the conclusion that he doesn't think Zahawi is being entirely truthful.
Speaker 1: And of course British Soon, AXT spokesman this week, has
Speaker 1: declined to vouch for the former chancellor's honesty. But it's
Speaker 1: shot me yet another light, hasn't it on the deep
Speaker 1: connections between the Tory Party and the city of London,
Speaker 1: but also the enormous wealth of many of the people
Speaker 1: right at the top of the Conservatives. And this big
Speaker 1: problem right in the middle of the economic troubles that
Speaker 1: the country finds itself in, is causing a great, big
Speaker 1: political headache for the Prime Minister. I'm David Merritt and
Speaker 1: this is In the City Plumberg's podcast, connecting you to
Speaker 1: the stories and the voices at the heart of the
Speaker 1: City of London. So this week the Tory Party is
Speaker 1: in term on again, this time about the tax affairs
Speaker 1: a former chancellor, the deems a Harwi. And we've learned
Speaker 1: a lot about Mrs a Harwi's enormous wealth and the
Speaker 1: relatively small amount of tax he's paid on that, and
Speaker 1: perhaps he's quotes carelessness with filling out his tax return,
Speaker 1: something that I know is on everyone's mind as the
Speaker 1: deadline loom. So we spoke with Professor A ruined Advanney,
Speaker 1: who studies tax systems around the world, how governments deal
Speaker 1: with wealth, and he's got some suggestions for how the
Speaker 1: government could better handle the very highly politically charged question.
Speaker 1: But first we spoke with our man in Westminster and
Speaker 1: the lord of all the WhatsApp chats groups amongst Tory
Speaker 1: MPs are very own Alex Wickham. Alex, thank you for
Speaker 1: coming back to in the City pleasure. Thank you for
Speaker 1: having me. Have you done your tax return yet? I
Speaker 1: actually have the all the sort of little journalistic add
Speaker 1: ons all good. Yeah. I actually came into the office Loso.
Speaker 1: We came to do obviously, the deadlines looming. I thought
Speaker 1: I needed, I need to be undistracted, and it was added.
Speaker 1: You know, it's given an added piquancy. I think that
Speaker 1: she is never a fun job. But the kind of
Speaker 1: the contrast between you know, all those boxes that say
Speaker 1: things like, you know, foreign investments, income from other sources
Speaker 1: all around the world, you know, no, no, no, no no,
Speaker 1: and you know, poultry amount of kind of interest given
Speaker 1: to me by my bank. And I just sort of
Speaker 1: sat there comparing this with the eye popping numbers of
Speaker 1: our form a chancer and thinking, well, I feel a
Speaker 1: little bit insignificant. Do you think people around the country
Speaker 1: are feeling that as well? I think that is exactly
Speaker 1: exactly it. You know, regardless of the ins and outs
Speaker 1: of whether he's paid his taxes, whether he's in whether
Speaker 1: he's in trouble with the taxman, etcetera, etcetera, this his
Speaker 1: scale of this. It's just something that sums up one
Speaker 1: of the problems that the government has, which is if
Speaker 1: you're if you're a normal person, you look at the
Speaker 1: Deans of Hardway and you sort of go well, I mean,
Speaker 1: how can you have forgotten to pay three three million
Speaker 1: pounds in taxes? How can you have been careless about that?
Speaker 1: As his statement his own statement says, I mean careless
Speaker 1: is oh yeah, you know I missed, like you say,
Speaker 1: ten pounds of interest off my off my taxmiit or something.
Speaker 1: We've obviously we've had the non dom raw over the
Speaker 1: prime minister's wife. We all know about his extensive wealth.
Speaker 1: Is the woralth is prime minister we've had and then
Speaker 1: of course we've just had this issue about the former
Speaker 1: Prime minister Boris Johnson and the BBC chairman Richard Sharp
Speaker 1: alone for eight hundred thousand pounds to cover his I
Speaker 1: mean you know that sort of and a number that
Speaker 1: people won't be able to identify with. And so in
Speaker 1: terms of kind of how much you would need to
Speaker 1: live your life, it's more than a lot of people
Speaker 1: learned in their careers. So how much damage is all
Speaker 1: of this doing out there in the country? Do you
Speaker 1: think in terms of the political fortunes of this government.
Speaker 1: I think quite a lot. I mean, on the one hand,
Speaker 1: you know, the tax of the private tax of hairs
Speaker 1: of cabinet ministers are quite technical, very technical, and so
Speaker 1: even we as journalists don't understand the ins and outs
Speaker 1: of them. We don't know the full details. Yet the
Speaker 1: Prime Minister doesn't. That's why he's you know, called this
Speaker 1: inquiry into the Deans are We. But it's the principle
Speaker 1: that everybody can get. Everybody understands it. Like you say,
Speaker 1: if a normal person goes to the bank for a
Speaker 1: ten thousand pounds loan to do some home renovations or something,
Speaker 1: you know, compared to the money that Boris Johnson is
Speaker 1: talking you know, is talking about, and then and then
Speaker 1: certainly on on an even different level to that than
Speaker 1: than the demons of are We money. And there's nothing
Speaker 1: intrinsically wrong with being a rich person a and who's
Speaker 1: been successful in business. It's great that we politics can
Speaker 1: attract successful business people into it to to you know,
Speaker 1: get the finest minds and all of that sort of thing.
Speaker 1: But the problem is when you've got the deems are
Speaker 1: Harway worth tens of millions of pounds having to explain
Speaker 1: to Rishi Sunac with his family worth hundreds of millions
Speaker 1: of pounds about you know, where this five million pounds
Speaker 1: worth of tax has gone missing? It is just, you know,
Speaker 1: it just feeds into the native that the Tories just
Speaker 1: don't get it during a cost of in crisis, inflation,
Speaker 1: prices rising, all of this sort of thing. It just
Speaker 1: feeds into it. And everybody can understand that, and everybody
Speaker 1: can see, you know, ultimately they're not quite like us.
Speaker 1: But you know, to be fair, as you said, we
Speaker 1: want to attract business people into politics. And that's just
Speaker 1: remind everyone that the Deems are Harry founded the polling
Speaker 1: company you gov went on to be enormously successful and
Speaker 1: influential still is in fact, you know, ironically, of course,
Speaker 1: I'm looking at a you gov poll. In your story, Alex,
Speaker 1: you wrote going the Tories are lagging a buy more
Speaker 1: than twenty points. But you know it's you guys who
Speaker 1: are giving that information. But I think you know, the
Speaker 1: broader point here is that we do want successful people,
Speaker 1: or people who know how to run businesses and know
Speaker 1: how to create wealth and boost the economy running the government.
Speaker 1: So shouldn't we be a little bit more relaxed about
Speaker 1: some of the stuff. I mean, I think British voters
Speaker 1: historically they don't really go for the politics of envy.
Speaker 1: You knows, if you look at the last hundred years
Speaker 1: of British political history, they haven't really elected many hardcore socialists.
Speaker 1: They haven't really you know, tried to soak the rich
Speaker 1: too much, you know, generally certainly compared to perhaps some
Speaker 1: other countries. But you know, you just feel that this
Speaker 1: is on a different scale, you know, and where it's
Speaker 1: landed in the political cycles. The timing, right, it's the timing.
Speaker 1: Last time we chatted, I think, on in the city
Speaker 1: it was in the absolute height of the trust drama
Speaker 1: and we were taking bets about how long she was
Speaker 1: going to last. And we all know about the lettuce obviously,
Speaker 1: and I think she didn't even last out that day.
Speaker 1: But and you talk memorably about the I think the
Speaker 1: exploding head and vomit emojis on the on the tack
Speaker 1: groups on what'sapp? What what sort of emojis are we
Speaker 1: seeing at the moment of people, how people really chronicling
Speaker 1: this on those all important WhatsApp groups that I mean,
Speaker 1: the mood and the Tory Party, let's be honest, is
Speaker 1: never good and it hasn't been for for years. But
Speaker 1: I mean it is true though that we're only a
Speaker 1: few months into is she seen next premiership. He would
Speaker 1: absolutely have hoped for a honeymoon period. He would have
Speaker 1: hoped for people to be saying, oh, come on, give
Speaker 1: him a chance. He's only been in for five minutes.
Speaker 1: You know he needs to he needs to work out
Speaker 1: all works and you know have at least a couple
Speaker 1: of years before, you know, before we make it make
Speaker 1: a judgment on whether it's a good prime minister or not.
Speaker 1: But already Tory MP's are grumbling. And the main issue,
Speaker 1: to be honest, is gross and tax and you know
Speaker 1: the Treasury briefing out very clearly no tax cuts coming
Speaker 1: in the in the March budget. You know you're going
Speaker 1: to have to wait. The public finances that we had
Speaker 1: out this week worse than bad, right, worse than expected
Speaker 1: in terms of government debt and borrowing. And you know,
Speaker 1: there is just no good news from the government. I mean,
Speaker 1: there is a way to raise more money that is
Speaker 1: perhaps politically palatable, and you can imagine if there was
Speaker 1: a labor government in power at the moment that they
Speaker 1: would be looking at things like capital gains, which was
Speaker 1: the structure that Mr Zahari is is using. Two taxis
Speaker 1: his wealth. And you know, people who work in the
Speaker 1: city of London, the people who are the highest earners
Speaker 1: in the country. There's a relatively small constituency of people
Speaker 1: who you could potentially tap from all tax but politically
Speaker 1: broadly that could find support in the country. But the
Speaker 1: connections to the city are just a little bit too deep,
Speaker 1: aren't they for them to consider sort of rinsing their
Speaker 1: backers in that way. And a good example of that
Speaker 1: is is non dom status, where labor have said, you know,
Speaker 1: we're scrap no non dom status and spend them on
Speaker 1: a pay rise that probably quite popular in the public right,
Speaker 1: and it's it's a populist policy. Let's be honest. You know,
Speaker 1: scrapping nondom status raise a bit of money, but it's
Speaker 1: not you know, it's not as a silver bullet that
Speaker 1: that fixes the economy. I mean, Mrs Soon that gave
Speaker 1: hers up right, and she did. I mean I wonder
Speaker 1: if that's whether the story might turn next because talking
Speaker 1: of HMRC settlements, but I mean labor can it is
Speaker 1: easy for labor to say, look, identify and take advantage
Speaker 1: of the of the Tory's weakness as being seen as
Speaker 1: out of touch and being seen as on the side
Speaker 1: of the super rich. They can pick something like nondom status,
Speaker 1: say we'd get rid of it. It's not gonna probably
Speaker 1: do that much in damage to the economy in terms
Speaker 1: of attracting investment and talent into Britain, but it's certainly
Speaker 1: is something that will resonate with people, and you know,
Speaker 1: speaking to Tory MP's it is something that increasing numbers
Speaker 1: of Tory and PISA are saying, We're going to say,
Speaker 1: why don't we just scraped nondom status, you know, why,
Speaker 1: why why don't we just try and get ahead of
Speaker 1: labor on some of this stuff, because otherwise, going into
Speaker 1: an action campaign, they're just going to paint us is
Speaker 1: you know, helping out the helping out the super rich.
Speaker 1: And ultimately, whether it's the Boris Johnson BBC story, whether
Speaker 1: it's the Deems are Harby in his taxes, this idea
Speaker 1: that a sort of elite you know, behind closed doors,
Speaker 1: sorts it all out with HMRC or sorts all out
Speaker 1: with the BBC. It can sound a bit conspiratorial, but
Speaker 1: also there's an element of truth to it and that
Speaker 1: is the sort of thing that really does wind people
Speaker 1: up because it makes it just makes people a bit
Speaker 1: a bit sick and and you know, ultimately, if if
Speaker 1: when we're doing our tactual returns, we're we're careless, then
Speaker 1: we are unlikely to be able to negotiate a settlement
Speaker 1: with HMRC that makes every unhappy and we don't have
Speaker 1: to worry about it. It's going to be much more serious. Well,
Speaker 1: I was actually when I finished, when I finally filed
Speaker 1: my one, not we came do actually you know the
Speaker 1: thing pinged back that I've actually overpaid and I was
Speaker 1: during rebate, you know, ninety four pounds. So there there
Speaker 1: won't be a career in politics for you. There. I
Speaker 1: went out and celebration straight away. Excellent, Alex Wikins, thank
Speaker 1: you so much for joining us. Okay, so this whole
Speaker 1: conversation about Zahawi's tax problems got us thinking a little
Speaker 1: bit more about how the entire tax system works, or
Speaker 1: rather doesn't when it comes to how much the wealthy
Speaker 1: are paying. And we came across the paper from the
Speaker 1: LSC that asked this question how much tax are the
Speaker 1: rich really pay? And very pleased to say, one of
Speaker 1: its co authors, Professor Aaron Advani, has joined us in
Speaker 1: the London studio. He's an associate professor in the Economics
Speaker 1: Department at the University of Warwick, and he's also a
Speaker 1: research fellow at the Institute for Fiscal Studies. Are welcome
Speaker 1: to in the city. I guess my first question is,
Speaker 1: I mean, did this this big story about Saharawi has
Speaker 1: been dominating the news all week? This is what you
Speaker 1: study for your work. Do you were you surprised by
Speaker 1: by what the world is now discovering about his tax offers.
Speaker 1: It's worth saying, you know, we we have access to
Speaker 1: data from H Marcy for all of the work that
Speaker 1: we do, and it's all anonymous, so we don't know
Speaker 1: anything about kind of particular individuals. But I think one
Speaker 1: of the you know, striking things for me was less
Speaker 1: about the specifics of his apparent non compliance is he's
Speaker 1: not paying what you're supposed to have paid. But actually
Speaker 1: the fact that when you sort of step back, you
Speaker 1: see that the story is that he got twenty seven
Speaker 1: million pounds in capital gains. It's it's been reported, and
Speaker 1: he was supposed to pay about three point seven million
Speaker 1: pounds in tax. So when you think of what that
Speaker 1: is as a tax rate, that's like strikingly low. The
Speaker 1: thing about that which might surprise other people if they've
Speaker 1: sort of sating down the numbers, is that it's very
Speaker 1: low compared to what you'd expect for someone with millions
Speaker 1: of pounds. You know, normally we'd think of the headline
Speaker 1: tax rate for people who are high income as being
Speaker 1: forty five as the top right, and then there's a
Speaker 1: couple of pence also of national insurance that they're paying.
Speaker 1: So you think, you know, you'd be paying getting on
Speaker 1: for half of that money away, but actually it's much
Speaker 1: much lower. And that's that's because capital gains have a
Speaker 1: number of features. One is that they just have a
Speaker 1: lower tax rate in general. But then on top of
Speaker 1: having the lower tax rate of rather than that top
Speaker 1: you could at the time get up to ten million
Speaker 1: pounds only ten percent. That's now gone down to one
Speaker 1: million pounds, but at ten percent, and so that's ten
Speaker 1: percent is the sort of rate you'd expect someone on
Speaker 1: fifteen tho pounds a year to be paying, so below
Speaker 1: a full time million wage salary, and that's the kind
Speaker 1: of rate you could you could get before up to
Speaker 1: ten million pounds. You can now get that on the
Speaker 1: first million pounds of capital gains. These are numbers which
Speaker 1: are astonishing for most members of the public. Could you
Speaker 1: explain a little bit more about this difference. Then there's
Speaker 1: capital gains, the different rate of tax you can pare
Speaker 1: on capital gains versus normal income, and why that structural
Speaker 1: difference favors the wealthy. Capital ens are the sort of
Speaker 1: thing that most people will never experience in their life
Speaker 1: in the way they have to report tax on it.
Speaker 1: If you think of anything in capital and most people
Speaker 1: think of having a second home. So somebody who owns
Speaker 1: a second home and sells it, if the value of
Speaker 1: that home increased between the time they bought it at
Speaker 1: the time they sold it, they have to pay tax
Speaker 1: on them. That's capital gainst tax. That's actually a very
Speaker 1: small share of what most capital gains come from. Most
Speaker 1: capital gains are actually from the ownership of businesses. So
Speaker 1: if you own a business, you set up a business,
Speaker 1: at some point you sell it, which is the example
Speaker 1: you have here with the demons aw We, or indeed,
Speaker 1: if you set up a business and then at some
Speaker 1: point you just liquidate the business, so you don't sell
Speaker 1: that no one wants to buy it from you, but
Speaker 1: you just say, I'm sort of shutting down the business,
Speaker 1: and all of the value of the business now comes
Speaker 1: to me. Then the change in the value over that
Speaker 1: time to the value that you sell the business for you,
Speaker 1: the value of the business when you liquidate it less
Speaker 1: the value it was when you set it up. That's
Speaker 1: what you get in capital gains. And those capital gains
Speaker 1: are taxed are much much lower tax rates than income
Speaker 1: tax rates. So as I said, the sort of headline rates,
Speaker 1: there's a higher twenty eight percent if it's on second
Speaker 1: and additional properties, and then there's this special low ten
Speaker 1: per cent rate for people who have a business that
Speaker 1: they own and manage. They get a lower rate on
Speaker 1: the first now million pounds. So ZAHOWI sold this business
Speaker 1: and that's where this big lump sung come came from.
Speaker 1: So to be to be fair, I guess this isn't
Speaker 1: the sort of inc that people would expect to generate
Speaker 1: year or year out. So is that one of the
Speaker 1: reasons why the tax rate is actually nominally, you know,
Speaker 1: quite significantly lower for it. It's interesting the structure of
Speaker 1: capital gainst tax has changed so many times over the
Speaker 1: last you know, changed about every ten year. So there's
Speaker 1: a big reform by Nigel laws gotten Brown and then
Speaker 1: two eight was Alistair Darling. And there's the kind of
Speaker 1: difficulty with Catholic capital gains as you want to find
Speaker 1: some way to ensure that you are kind of encouraging entrepreneurship.
Speaker 1: Like one of the things that capital gains are about
Speaker 1: is if you set up a business and grow it,
Speaker 1: then that's a capital gain. So you want to encourage that.
Speaker 1: But you don't want to encourage is people sort of
Speaker 1: setting up what is which is not the case certainly
Speaker 1: in the Harwer's case, where you know you got was
Speaker 1: clearly a very large and very successful company, but you
Speaker 1: don't want to encourage is along the side of you know,
Speaker 1: the small number of cases of someone like Zahawi who
Speaker 1: sets up a successful business, A lot of people who
Speaker 1: have a consultancy business that would be just someone paying
Speaker 1: them an income to work as a consultant, but instead
Speaker 1: they take their money through a consultancy business and keep
Speaker 1: the money in the business and at some point dissolve
Speaker 1: the company and get the money out that way and
Speaker 1: get the low rate. So what you don't want to
Speaker 1: encourage is someone who would otherwise have been paying income
Speaker 1: tax and two percent national insurance who instead is now
Speaker 1: able to pay this sort of ten rate by just
Speaker 1: getting money paid not to them personally, be getting paid
Speaker 1: to their business and then at some point them taking
Speaker 1: the money out of the business. And so that's that's
Speaker 1: kind of what that trade off is as a one.
Speaker 1: One way to square that circle is to say, well,
Speaker 1: what you could do is to have a tax rate
Speaker 1: on capital gains that looks more similar to the income
Speaker 1: tax rate, but where because you know, as you say,
Speaker 1: capital gains are quite lumpy, they sort of come out
Speaker 1: at one point in time rather than annually. What you
Speaker 1: could do is to average out the capital and say, okay,
Speaker 1: you've owned this business for ten years and you've made
Speaker 1: million pounds or whatever it is. Will divide that up
Speaker 1: and think of that as two point seven million pounds
Speaker 1: a year, and that that's how we'll think about the
Speaker 1: taxation of it. And then that would be a way
Speaker 1: in which if you've i mean two points of a
Speaker 1: million punis is still gonna be in the top rate.
Speaker 1: But you know, if what you ended up with was
Speaker 1: forty pounds a year, then not all of that would
Speaker 1: be taxed at that top rate because it's clearly much
Speaker 1: lower than what we would charge for the fort rate.
Speaker 1: I mean Britain of course, has a big problem on
Speaker 1: accent that we need to somehow raise more. We had
Speaker 1: a big, big feature out this week on Bloomberg, like
Speaker 1: the Little Audrick, about the funding problems of the NHS,
Speaker 1: and there's some pretty alarming charts in that around the
Speaker 1: need for Britain to raise more in tax But Britain
Speaker 1: needs to somehow pull in more money, whether it's from
Speaker 1: change of the coupital gains system, somehow boosting the coffers
Speaker 1: of the treasury. How in your view should they do that?
Speaker 1: Should they be pursuing the wealthy more to pay bigger
Speaker 1: share of the tax income, So to think about it
Speaker 1: less as pursuing the wealthy and more as pursuing wealth.
Speaker 1: And so the distinction there is it's not about trying
Speaker 1: to tax people just because they are rich. It's particularly
Speaker 1: about trying to tax money that comes from wealth, from
Speaker 1: owning assets and getting a return on that relative to
Speaker 1: taxing labor. And the moment we tax labor pretty heavily.
Speaker 1: So if you work, you know, even if you're on
Speaker 1: a very high income, you know people who are you
Speaker 1: know a quarter of people who are earning above a
Speaker 1: hundred thousand pounds are paying sort of what you'd expect
Speaker 1: that headline rate to look like, which is, you don't
Speaker 1: want to get to two million pounds about forty seven percent.
Speaker 1: But even when you get to hundred and fifty thousand
Speaker 1: and you hit that rate, it's still the case that
Speaker 1: you've got most of your income tax at a lower
Speaker 1: rate than that. And so you know, the average rate
Speaker 1: that you're paying is below that, but there's there's a
Speaker 1: chunk of people who are actually paying those rates. But
Speaker 1: there are a lot of people who are on those
Speaker 1: very high incomes who are paying actually their effective tax
Speaker 1: rate is much lower. And that's because the form in
Speaker 1: which they take their income. So it could be that
Speaker 1: they get money is dividends, and dividends attacked at lower
Speaker 1: rates than than labor income. It could be that they
Speaker 1: own properties and they get money from renting them out
Speaker 1: that's taxed at a lower rate. And also it doesn't
Speaker 1: isn't covered by the National Insurance or Health and Social
Speaker 1: care levy that as it was, So there are these
Speaker 1: kinds of other forms you can take it, and then
Speaker 1: you as we've just been discussed in capital gains as
Speaker 1: tax at much lower rate. And so people who get
Speaker 1: income or gains. Who get returns from capital from owning
Speaker 1: assets are actually taxed a much lower rates and people
Speaker 1: who are taxed on labor income. And that means that
Speaker 1: it's not just about the difference between rich and poor,
Speaker 1: although it is the case that money from capital is
Speaker 1: kind of something that happens more for rich people than
Speaker 1: for poor people. But it's also the case that even
Speaker 1: among the rich people, there are some people who are
Speaker 1: paying really those headline rates. So people who earned millions
Speaker 1: of pounds and are paying for there might be a
Speaker 1: banker in the city and the only income they have
Speaker 1: as their per y income, and it's very high, but
Speaker 1: it is, you know, almost offer. It is being tacked away.
Speaker 1: At the same time, there's somebody else who's a consultant
Speaker 1: and who instead left, you know, some big consultancy from
Speaker 1: and they've gone and set up their own consultancy. They're
Speaker 1: effectively just doing the same job they were doing before,
Speaker 1: but they're paying a much lower rate. And actually that's
Speaker 1: that's bad for growth as well. It's sort of bad
Speaker 1: because they're getting this lower attacks rate in a way
Speaker 1: that's not really because they're doing something kind of different,
Speaker 1: but they're not trying to grow the consultanty and make
Speaker 1: it some big thing. They're actually just you know, fantastic consultant.
Speaker 1: But now they've at the same time had to set
Speaker 1: up their own business do the paperwork. They're the one
Speaker 1: who has to now do some of their own HR
Speaker 1: deals and accountant all of those other bits. There's all
Speaker 1: the things that they're not the best person to do.
Speaker 1: It would be much better for them to go and
Speaker 1: work for some big consultant, so you could do that
Speaker 1: stuff for them, And so they're being less productive and
Speaker 1: it's worth it for them because they get such a
Speaker 1: low attacks rate that their take home is bigger. But
Speaker 1: kind of collectively that's inefficient. It would make much more
Speaker 1: sense for them just to be inside a big company
Speaker 1: that could organize all of the other administrative bits for
Speaker 1: them and they could just get on with a bit.
Speaker 1: They're fantastic. What's the solution here? Should we have a
Speaker 1: special wealth tax? Lots of countries have a wealth tax,
Speaker 1: don't they in Europe and around the world. Should should
Speaker 1: Britain think about that? It's been mooted a few times
Speaker 1: but always dismiss What should we do? Yes, there's a
Speaker 1: few parts to that. So the first thing is if
Speaker 1: we're trying to fix bits of the tax system and
Speaker 1: raise money, the first places I would go is to
Speaker 1: fix some of the problems with capital gainst tax, which
Speaker 1: would be something like the Nigel laws and reforms. So
Speaker 1: equalize the rate with income tax, have an allowance for
Speaker 1: at least for inflation, certainly like Alma Wilson did, but
Speaker 1: do the averaging that we talked about, so that you're
Speaker 1: not taxing the lumpiness of that of that gain, and
Speaker 1: you're you're spreading out over time and getting rid of
Speaker 1: the fact that at the moment, if you can hold
Speaker 1: an asset till you die, you don't have to pay
Speaker 1: the tax on it, so you kind of hand on
Speaker 1: the asset to your your kids and in the capital
Speaker 1: gains tax gets wiped out, So you'd fix that. You'd
Speaker 1: fix some of the problems with inheritance tax where agricultural
Speaker 1: and business property don't get taxed, and pensions in fact,
Speaker 1: if you can hang onto them, don't get taxed. So
Speaker 1: if you kind of in the existing tax system, there
Speaker 1: are things you would fix. Again. Actually property at the moment,
Speaker 1: someone who's you know, on minimum wage will will like
Speaker 1: earn their income and pay income tax and national insurance,
Speaker 1: and they'll go home and pay their landlord some rent
Speaker 1: and that rent will be you know that the land
Speaker 1: will be taxed income tax, but won't pay national insurance.
Speaker 1: So those kind of things I would fix first, and
Speaker 1: then they would raise substantial amounts of money. But then
Speaker 1: I think if you're going beyond that, there is some
Speaker 1: case for a regular annual wealth tax. It wouldn't be
Speaker 1: one that would affect a large sway of the population.
Speaker 1: The case that people I think could make for an
Speaker 1: annual wealth tax is if you need to raise some money,
Speaker 1: you could raise, for example, an annual wealth tax of
Speaker 1: about one percent on only the wealth above say ten
Speaker 1: million pounds. So if you have ten million and one
Speaker 1: pound in wealth, you're gonna pay one pence that you know,
Speaker 1: it's only once you get substantial above that ten million
Speaker 1: pounds you're starting to pay any of that. And that
Speaker 1: would affect about twenty individuals in the UK. But they
Speaker 1: would raise quite a lot of money. So a one
Speaker 1: percent tax above ten million would raise about eleven billion pounds,
Speaker 1: which is just from just from twenty two people, just
Speaker 1: frommy people, which is like the same as about putting
Speaker 1: one and a half to two p on the basic
Speaker 1: creative income tax. So it's a it's a substantial amount
Speaker 1: of money you'll be getting from doing that, But the
Speaker 1: case we're doing that, it's so it's partly a revenue case.
Speaker 1: But the other, I think kind of practical case is
Speaker 1: that we know that for that group, actually, even if
Speaker 1: you fix those other taxes on wealth, they're probably not
Speaker 1: going to be enough to get much revenue from those people.
Speaker 1: And there's just you know, you can see that in
Speaker 1: the statistics. So there's a famous graph that the Office
Speaker 1: for Tax Implification, a government body, put out a couple
Speaker 1: of years ago, where they showed what the effective tax
Speaker 1: rate on inheritance taxes and sort of rises so that
Speaker 1: the headline tax rate on inherence taxes forty percent, but
Speaker 1: only on the wealth above a threshold. And so as
Speaker 1: for a couple who own a property, you only start
Speaker 1: paying after about a million pounds, and so that actually
Speaker 1: starts rise after a million pounds. It rises to a
Speaker 1: peak at about about two million pounds, but then it
Speaker 1: starts to fall off a ten million pounds. It's down
Speaker 1: back about ten per cent. And that's because once you
Speaker 1: get to those levels of wealth, you know clearly there
Speaker 1: are things you can do to try to plan to
Speaker 1: try to minimize your attax, right, and so that's that's
Speaker 1: kind of the case that people I think can make
Speaker 1: for a wealth and annual taxes that at those higher
Speaker 1: levels of wealth above about ten million pounds, the administrative
Speaker 1: costs of pretty loows you can do deal with all
Speaker 1: of the valuation and complications that come around that you
Speaker 1: can reraise substantial revenue and you're getting tax from set
Speaker 1: of people who actually won't be paying as much tax
Speaker 1: from those other capital taxes even if you were to
Speaker 1: fix those taxes. But but the argument has always been,
Speaker 1: hasn't it you? You you're frightened people off? People don't
Speaker 1: care about what's what's the tax. What they care about
Speaker 1: is like, at the end, after you've paid your attax,
Speaker 1: what what lifestyle can you afford? And those that's you know,
Speaker 1: what people a look at when then something do I
Speaker 1: want to live here or there or somewhere else? Is like, well,
Speaker 1: what's my life going to look like there? And so
Speaker 1: a lot of those other basic services and things in
Speaker 1: the economy won't be changed by that, actually, you know,
Speaker 1: sort of conversely, the worry might be for a set
Speaker 1: of people well as public services in the UK Degrede.
Speaker 1: I mean, it's certainly the case that if you're at
Speaker 1: high enough level of wealth you make, you're potentially more
Speaker 1: likely to be using private healthcare and private schools, probably
Speaker 1: not queuing up at any so maybe you're probably not
Speaker 1: queuing up any or you know, waiting you know how
Speaker 1: many hours it was now for an ambulance. But it
Speaker 1: still is the case that it's not a you know,
Speaker 1: it's not a great place to live, and that's what
Speaker 1: the society around you looks like. So there is a
Speaker 1: case of being involved in that. The other thing actually,
Speaker 1: just quantitatively that I can say is, you know, specifically
Speaker 1: for a subset of very wealthy people, who are you know,
Speaker 1: who are the nondoms, there were actually some big reforms
Speaker 1: where you know, some of them were brought into you know,
Speaker 1: the the Nondon regime is one that let people not
Speaker 1: pay tax on their foreign investment income and foreign capital
Speaker 1: games like like the Prime Minister's wife, like the Prime
Speaker 1: Minister's wife, and for people who had been in the
Speaker 1: UK for more than fifteen years, or for people who
Speaker 1: were born in the UK to a UK father who
Speaker 1: previously were able to claim nondom status if they went
Speaker 1: and lived abroad for a little while but then came back.
Speaker 1: For those people, the regime was removed and so that
Speaker 1: was effectively an increase of about ten percent in their
Speaker 1: tax rate, which is pretty large. We actually expected that
Speaker 1: we'd see some movement based on that, but we actually
Speaker 1: found about point to percent of people responded to this,
Speaker 1: which was tiny. Kind of naturally thought, all, let's try
Speaker 1: and talk some people and see if you can get
Speaker 1: a sense for what's going on. And that's where you know,
Speaker 1: when I talked, we actually talked to a few nondoms
Speaker 1: and they said, look, we you know, we were affected
Speaker 1: by the former condoms, so we're affected by this reform.
Speaker 1: But ultimately, you know, my kids are in schools here
Speaker 1: and I like that, right, I like the theater, and
Speaker 1: I like the restaurants. You know, there's all these things
Speaker 1: in London that you know a lot of nondoms, is
Speaker 1: what's saying. Nondoms live specifically in London, So this is
Speaker 1: this is in the city and London is where a
Speaker 1: lot of them want to be. Of course, the deadlines
Speaker 1: looming for everyone, isn't it that the January thirty one,
Speaker 1: you have you done, George, yet I've done mine. I
Speaker 1: always end up doing mine between Christmas and years. That's
Speaker 1: a very good time, isn't it when you know when
Speaker 1: you're fually miserable. Anyway, we can all just kind of
Speaker 1: professor ruined Advannie, thank you so much for joining us,
Speaker 1: Thanks very much, thanks for listening to this week's in
Speaker 1: the City. Will be back next week, but in the meantime,
Speaker 1: if you like our show, please head on over to
Speaker 1: Apple Podcasts or wherever you listen to podcasts and rate,
Speaker 1: review and subscribe. This episode was hosted by me David Merritt,
Speaker 1: was produced by Summer Sadi. Additional editing by Blake Maples
Speaker 1: and special thanks to Alex Brickham and a ruined Varney.
Speaker 1: And remember, you've got less than a week to finish
Speaker 1: your tax return.