Pressure is mounting on billionaires around the world to pay more tax.
Last week government ministers in four of the biggest countries in the world proposed a 2% minimum tax on the ballooning wealth of billionaires. The ministers of Germany, Brazil, Spain and South Africa said by doing this $250 billion could be raised every year to fight growing poverty and inequality. They are calling on other countries to join their campaign. Growing wealth gap Their intervention shows there's a growing international appetite for wealth taxes on the super rich. It’s easy to see why. During Covid, the world’s ten richest men saw their fortunes double. The world’s 3,000 billionaires now hold combined wealth of £11 trillion, while hundreds of millions of people live in extreme poverty. The gap is widening too. In the last twenty years the income gap between the top 10% and the bottom 50% has nearly doubled. The rich want to pay more tax Wealth taxes are popular among a growing number of super rich individuals – they recognise how unsustainable the situation is socially, economically and ecologically. Patriotic Millionaires represents many of these rich individuals. They advocate for wealth taxes. Abigail Disney, a member of the group and heiress to the Walt Disney fortune, wrote in The Guardian last week that: “It is only right that the funds to mitigate further damage [to the planet] and develop green energy systems come from those most able to pay – and who, by the way, are the ones disproportionately driving it with their jet-setting, gas-guzzling lifestyles.” Patriotic Millionaires took to the streets of Washington DC last week and projected their wealth tax message onto public buildings. We’ve won before Concerted global action against the ballooning wealth of billionaires may feel difficult – but the tax justice movement won a similar battle not long ago. Three years ago 136 countries agreed a minimum global corporation tax rate of 15%. Although not perfect – less well-off countries got a poor deal, and the 15% rate is far too low – this agreement does show that joined up action to tackle abuse is possible. It’s helping to stop big corporations jumping from jurisdiction to jurisdiction to avoid tax. The same can be done with billionaires. If enough countries pass similar wealth tax legislation, the world’s billionaires will have nowhere to shelter their wealth.
Unfair loopholes and exemptions allow the super rich to hugely reduce their inheritance tax bills. In some cases, allowing vast fortunes to be passed on untouched.
The super rich pay less inheritance tax by passing on assets through family trusts or by using various exemptions built into inheritance tax. For example, there’s no inheritance tax paid on shares listed on the AIM alternative stock market. These loopholes are not available to the average family liable for inheritance tax, whose wealth generally sits in a family home. Our research shows that it’s overwhelmingly the richest families who benefit from inheritance tax exemptions. A quarter of the headline rate Those with estates of £10 million pay just 10 per cent inheritance tax. This is just one quarter of the headline rate. A particularly stark example was that in 2016 no inheritance tax was paid on the bulk of the Duke of Westminster’s £8bn estate. Examples like this create resentment among people without great fortunes – when faced with getting in order the estates of deceased loved ones. Why should the super rich get away with not paying their fair share by using loopholes and exemptions? Pressure growing for reform This week the IFS, a major economics think tank, came out in favour of scrapping many of these unfair inheritance tax loopholes. We strongly support their call. The IFS has urged the government to abolish three major loopholes exploited by the super rich. “Inheritance tax is littered with special reliefs and exemptions which make the tax unfair,” they said. Their proposals would raise £3 billion a year – and would create a fairer inheritance tax system, where we all pay our fair share. “What should be the most progressive tax around, turns out to be regressive, at least among those estates that pay it”, Paul Johnson, the head of the IFS, argued. Feeling lucky Our friends at the Fairness Foundation published fascinating new research this week, which gives a really interesting new perspective on inheritances. It posed the question to the public: are our lives determined more by the hard work we put in, or by luck? It isn’t an abstract question. It informs how we think about our lives, the economy and tax: do we live in a meritocratic society, or are our lives determined by who our parents are – and what they leave us in inheritance? The research found most people believe success and wealth are a result of merit rather than luck. This belief in hard work and merit is fascinating because it is increasingly contradicted by many of the facts on the ground. Is the UK meritocratic? Research shows inherited wealth is becoming a much more important factor in determining prosperity than work or merit. And other research shows every billionaire in the world under thirty has inherited their wealth. We shouldn’t kid ourselves that the UK is a meritocratic society. Inherited wealth is becoming a much more powerful influence on determining peoples’ lives than work or merit. This is hugely unfair. To foster a truly meritocratic society, we need to rebalance the playing field. This is why we campaign for wealth taxes on the super rich and an end to tax loopholes. It’s also why we support a reformed inheritance tax – one that removes the loopholes used by the super rich.
Hundreds of billions of pounds of tax are lost globally every year to tax avoidance.
This is money that should be going into building hospitals and schools, into paying for doctors, and teachers; reducing poverty and improving ordinary lives around the world. Instead, this money is disappearing into the offshore accounts of the super rich. It’s hard to know the scale of money hidden offshore. We need more transparency to tackle the problem. That's why we’ve been working with the UK Anti-Corruption Coalition. Our new report highlights a shocking lack of progress from British Crown Dependencies and Overseas Territories towards greater transparency. A very British problem Many of these places, like the British Virgin Islands, the Cayman Islands, Bermuda and Jersey, act as secrecy jurisdictions and tax havens. They function as tax havens because financial flows into their jurisdictions are shrouded in secrecy, benefiting corrupt politicians, gangsters and oligarchs from across the globe. That’s where we come in. We’re demanding these places publish open registers of who owns the companies in their jurisdictions – and therefore who owns the money stashed in the companies. Registers of ownership would shine a light on the financial affairs of the super rich who operate in these sometimes tiny jurisdictions. It’s a major step toward tackling global tax avoidance. It’s the law In the case of Overseas Territories these registers are not optional, they’re required under UK law (the UK itself introduced such a register back in 2016). Let me explain. Following pressure from ourselves, anti-corruption campaigners and progressive politicians the Anti-Money Laundering Act was passed in 2018. It required the UK government to ‘order’ British Overseas Territories to introduce public registers of ownership. In 2020, the UK government said that it was preparing such orders – and set a deadline of the end of 2023 for these registers to be introduced. However, little progress has been made. So far only Gibraltar – one out of the 13 Crown Dependencies and Overseas Territories reviewed – has introduced a publicly accessible register of company ownership as agreed. This Times piece, which quotes our work, sets out the problem in more detail. This TED talk on the subject is also very helpful. Our head of advocacy and policy, Rachael, explains the situation in these excellent shareable videos as well. We must hold them to account Let’s be clear. International tax avoidance in places like the British Virgin Islands is being enabled by the British government’s failure to act. Our government’s reticence to enforce its own laws is costing countries and citizens around the world billions of pounds in lost tax revenues every year. Dame Margaret Hodge MP puts it bluntly in her excellent piece in The Times on Monday: “Britain has become the jurisdiction of choice for dirty money”. That should concern and anger us all.
Untold billions in dirty wealth are still hidden in secretive offshore havens, our new research with the UK Anti-Corruption Coalition shows.
Almost all of Britain’s Crown Dependencies and Overseas Territories (CDOTs) are still very far from delivering on a years-old promise to clamp down on financial secrecy, according to the report. Just 8% of CDOTs analysed – one territory – has made their register public. Public registers of this kind make it much easier for key democratic stakeholders like the public, civil society, and journalists to see who owns shell companies, and to “follow the money”. In short, this means the vast combined offshore wealth of gangsters, tax dodgers, corrupt politicians, warlords and oligarchs from across the globe can still be hidden from scrutiny in shell companies in at least 12 jurisdictions. The report found that Gibraltar is the only one out of 13 jurisdictions reviewed that’s created a publicly accessible register of company ownership as agreed. While most CDOTs have now pledged to make at least some progress during 2024, there is as yet no stated timeframe from Bermuda or the British Virgin Islands (BVI). Recent polling by the UK Anti-Corruption Coalition and Survation found 72% of the British public think Britain should take more responsibility to work with CDOTs to tackle money laundering and tax evasion. “Tax abuse is a scourge that robs governments of vital revenues, citizens of decent public services and small businesses of investment," Rachael Henry, Head of Advocacy and Policy at Tax Justice UK said. "British Crown Dependencies and Overseas Territories are world leading enablers of tax dodging, sitting at the heart of a web of financial secrecy which allows for criminality," Henry added. “Despite previous commitments to transparency, there hasn’t been enough progress. The UK government needs to acknowledge its presiding role in international tax abuse and work with territories like the British Virgin Islands and Bermuda to put an end to mechanisms that facilitate this behaviour.” > Read the report in full here.
£5 billion a year could be raised by investing in HMRC – giving it more power to clamp down on tax avoidance – and properly clamping down on non-doms.
This was the big announcement from shadow chancellor Rachel Reeves this week. And it’s a step in the right direction. For context, £5 billion a year is enough to employ 150,000 nurses. It’s a huge amount of money. The party also created a new panel of experts to advise on cracking down on tax avoidance. The move shows Labour are becoming more ambitious when it comes to tackling tax abuse – and we welcome their ambition. Our head of advocacy and policy, Rachael, was on TalkTV making the case that they should go even further. Rachael was also quoted in the Mail and the Mirror. The pressure is mounting on Labour. Reeves was pushed on both BBC Breakfast and the Today programme as to why Labour aren’t going further, pursuing higher taxes on the very rich to support more investment in public services. It’s almost inconceivable that these sorts of questions would be put to a politician on the BBC even a few years ago. This isn’t a coincidence. All of our media work is helping to shift the debate towards raising taxes on the very rich. We are being listened to I have said over and again in this newsletter that HMRC needs more resources to tackle tax dodging. At the moment HMRC don’t have the resources to deter sophisticated tax dodgers (or answer the phone). In this vacuum, the scale of abuse is huge. Currently at least £36 billion a year owed in tax is left unpaid. This is called the ‘tax gap’. It shows just how badly HMRC is failing and unable to enforce its own rules. HMRC is chronically underfunded. A Parliamentary committee slammed the government last year for not investing enough in the tax authority. Parliament also found that for every £1 invested in HMRC compliance, £14 was recovered in additional tax. Investing in HMRC pays for itself in multiples. It’s well evidenced – as our friends at TaxWatch have shown. We’ve been making this case to politicians. And now Labour seems to be listening to our argument. We will keep lobbying them, pushing them to implement their HMRC plans if they are elected. It is vital they go further in reforming our unfair tax system, for example by taxing the ultra-rich more, as I argued in the Guardian this week.
Forbes has released its annual ‘Billionaire List’. It shows that there are more billionaires than ever before, and they have increased their wealth to record levels.
The Forbes wealth editor stated that ‘It’s been an amazing year for the world’s richest people’. This comes at a time of massive global instability, staggering inequality and an urgent need to combat climate and environmental breakdown. According to Forbes, there are 55 billionaires in the UK. Showcasing the massive intergenerational transfer of wealth, every single billionaire under the age of 30 - of which there are 15 - inherited their riches. Just one billion is a staggering amount of money. In fact, if a teacher on the average salary saved every single penny they earned, it would take over 30,000 years to become a billionaire. Raising revenue The level of wealth on display also highlights how much revenue would be raised by introducing wealth taxes. Our work on just six taxes on wealth shows that up to £50 billion a year could be raised and go straight into public services. That’s money to pay for nurses, doctors and dentists and resuscitate Britain’s ailing health service. As Tax Justice UK Executive Director, Robert Palmer, said on Twitter, world leaders need to ensure the super-rich pay their fair share. You can share his response here. Making the right case You may be surprised to see, but taxes on wealth do have popularity across the political spectrum. In a recently published collection of essays for the centre-right think tank, Bright Blue, Conservative MP John Penrose makes just this case. While we may not agree on all points, Penrose argues that rebalancing our tax system from work to wealth would be better. He argues that Britain taxes income in a ‘thoroughly regressive way by systematically giving a better deal to the rich at the expense of the poor’. Taxing wealth at the same rate of work would be a popular proposition. The Fairness Foundation recently commissioned public opinion polling that showed two in three people (65%) support reforming capital gains tax so that income from wealth is taxed either at the same rate or at a higher rate than income from work. Bright Blue also published a report in 2022 proposing that wealth should be taxed at higher levels, offset by a reduction in taxes on work. The think tank argued that wealth should be taxed at higher levels to respond to rising accumulation of wealth, and the role of inheritances in determining life outcomes.
Governments use taxes to discourage certain activities and behaviours – while encouraging others.
Cigarettes are a good example. The government tries to discourage people from smoking with high taxes on tobacco. They raise significant revenues in the process (£10.4 billion was raised from tobacco duty in 2024). Similarly, road tax on more polluting cars is generally higher – in order to encourage people to buy less polluting vehicles. Tax is a way to incentivise people to make healthier choices, or live less polluting lives, while raising useful revenues in the process. These revenues can be used to tackle the effects of the activity being taxed. Money from tobacco duty can be used by the NHS to treat lung disease, for example; or money from road tax can be used to tackle pollution caused by combustion engines. Jetting away with it It doesn’t always work this way, however. Especially when big business is involved. The UK aviation industry makes significant carbon dioxide emissions every year, contributing to climate change. You might think, by the logic set out above, the government would use tax to discourage flying; or at least make a revenue from it, in order to mitigate the polluting effects. And yet, broadly, the opposite is true. UK airlines benefit from extremely generous tax breaks from the UK government. They pay no tax at all on aviation fuel, for example. For too long the government has under-taxed the aviation industry. But I have some good news. Increase tax on private jets and premium tickets Taxes on wealthier flyers were increased by the chancellor in the recent Budget. Air Passenger Duty (APD) is a tax paid by airlines for every passenger who flies from the UK. It raises £3 billion a year. APD is a progressive tax. Passengers taking longer flights, traveling in business or first class, or by private jet pay more. The good news is the chancellor announced that he will increase air passenger duty from this year for passengers in premium economy, business and first class. We fully support APD and think the chancellor should go further – and raise the rates on business, first class and private jets much more. It’s the direction we must go in to avert climate catastrophe. Those with the broadest shoulders To make real headway in decarbonising and making the green transition, the government will have to raise and spend significantly more. This cost must fall firmly on those with the broadest shoulders. It must be a just transition. Airline Passenger Duty is a great example of this: it takes the lion’s share of its revenue from richer people – and discourages polluting activity. We could also introduce a frequent flyer levy. This would be a tax that increases the more flights you take each year. So those who fly more would pay more. Our friends at the New Economics Foundation set out how a frequent flyer levy could work. The rich pollute the most Research from Oxfam shows that richer people on average produce far more emissions than the less well off. The top 1% cause the same amount of planet-heating emissions as the bottom two-thirds of humanity, according to Oxfam’s research. We were proud last year to team up with Oxfam when they came out in favour of taxing the richest – and biggest polluters – more.
On 6 March Jeremy Hunt delivered his Spring Budget. The Chancellor stood up in the House of Commons and said that those with the broadest shoulders should pay their fare share. Yet he delivered a cut and run budget, knowing his government is trailing in the polls with an election likely to take place later this year. The tax cuts delivered at the budget will spell more agony for public services in the coming years. This is the opposite of what our country needs.
One thing that came through really clearly is that despite the continued cost of living crisis, Jeremy Hunt didn’t offer up a serious plan to help people that need it most. Britain needs sensible and well thought out investment, yet what it got was limited pledges that don’t meet the challenges of our time. While it was good to hear that the NHS will get capital funding to update IT systems, it was a drop in the ocean compared to the scale of the challenge the NHS faces. The Chancellor’s tax cuts were an obvious attempt to try to entice voters with an election looming. Jeremy Hunt cut a further 2p from National Insurance on top of cuts announced last year. But these measures are poorly targeted and won’t provide enough help to those that need it most. The average worker will only benefit by £8 per week, a paltry figure compared to the drastic rise in energy bills, food and essentials in the last couple of years. The last time national insurance was cut, polling shows only 7% felt like it made a difference to their own finances. The wealthiest households will benefit disproportionately from these cuts. In our reaction to the Budget on TalkTV, Rachael made it clear that for an average of £8 extra a week today, the country will be served up public spending cuts in years to come. What this looks like right now isn’t exactly clear, but we do have some ideas. We know that some government departments have protected budgets like the NHS and education. However, other parts of government will likely have their spending slashed. This means less money for councils, stripped back fire and rescue services, and eroded access to legal aid and justice through the courts. Simply put, further cuts will make the UK less safe and less fair. The Chancellor did make a few positive announcements. He scrapped the non-dom tax break that allows some of the super-rich to pay very low levels of tax. This has been one of Tax Justice UK’s top policy recommendations. This move shows that fairer taxes on the rich are politically possible. It also shows that outside of taxes on the richest, the options are very limited - taxes on wealth are where any government is going to have to look to find urgent revenues. Extending the windfall tax on oil and gas excess profits was another positive step. Giving HMRC more resources to tackle tax dodging is a no-brainer. Recent research by TaxWatch shows that for every £1 invested in compliance returns £14. But these measures are a drop in the ocean compared to what our country needs and as Robert pointed out on GB News, people aren’t buying it. Both the government and opposition have decried the state of public finances. Making tax fairer so the super-rich and wealthiest companies pay more is a smart solution to raise revenue - and it is wildly popular. Tens of billions of pounds can be raised every single year with just a small number of changes that adjust the balance of tax paid by those with excess wealth. The government could go even further by closing down or reforming deeply unfair tax loopholes, and raise more revenue, creating a fairer tax system in the process. This could also go some way to building trust, resetting the balance so that those that get their income from work are on an equal footing to those that derive their income from wealth. As the Chancellor said, those with the broadest shoulders should pay their fair share. If they did, we can avoid deep public spending cuts, and could see this country working properly again.
Next week the chancellor Jeremy Hunt will deliver his Budget.
There’s been an endless back-and-forth in the media. Will he cut taxes? Which taxes will he cut? Who would benefit? But it’s a sideshow. The Tories are dangling tax cuts in front of us, trying to distract us from the main event. Don’t be distracted The public realm is crumbling. Our NHS and services are falling apart after fifteen years of mismanagement and budget cuts. And they have no plan. The proposed tax cuts are a last ditch attempt to distract and to win a few more votes before the looming election. It’s a desperate cut and run attempt by the government, as our executive director Robert Palmer said on LBC News this week. But the UK public are smarter than that. We all know what a perilous state our country is in – and that tax cuts won’t fix it. The vast majority of people (74%) prioritise keeping taxes the same, or raising them, if it means better public services. That’s the finding of polling by Channel 4 News this week. They also found only 1 in 7 support tax cuts if it means cuts to public services. Spending cuts later Our polling shows the same. Since 2020 our research has shown most people don’t want tax cuts if it means public services get worse. And tax cuts now are almost guaranteed to mean public service spending cuts in the future. Jeremy Hunt is talking about this openly. The missing £36 billion One way to inject more money into our public services would be to go after those who dodge tax. Our friends at TaxWatch report that at least £36 billion of tax revenue goes unpaid every year. This is the ‘tax gap’. It occurs in part because HMRC don’t have the resources to properly investigate tax dodging. Another symptom of this was revealed on Monday. The Observer found that HMRC investigations of wealthy tax dodgers have halved in the past five years. “Parliamentary research shows that when the government invests in HMRC, the return on investment is significant,” I told the newspaper. In response to the story, the head of the Trade Union Congress, and boss of Richer Sounds, called on the government to take action against tax dodging. He should tackle tax dodging The tax gap is a huge sum of money. £36 billion-a-year is the same as the entire UK defence budget, or almost half the education budget. What’s the solution? TaxWatch rightly points out that HMRC needs to be better resourced to uncover tax dodging, and close the tax gap. For every extra £1 invested in HMRC, £18 is returned in lost tax. HMRC is also facing criticism this week for “all time low” customer service. Regular taxpayers are not getting the support and guidance they need. It can be impossible to speak to someone on the phone, while there is a special VIP phone line for ministers, civil servants and high earners. The solution is obvious. The government should invest more in HMRC to boost staff levels. This would generate more money to tackle the crises plaguing our public services. But will the chancellor listen?
Every so often we put out a story that really explodes in the media.
This happened to us last week when over 900 newspapers and websites picked up a comment our executive director Robert Palmer made about the prime minister’s tax return. Last year Rishi Sunak brought in £2.2 million in earnings. But he only paid 23% tax on it. This is the same tax rate as the average teacher. This situation is grossly unfair. The story was picked up by, to name just a few: Sky News, The Express, The Mirror, and The Guardian. As well as nearly 900 local newspapers. Robert was also on LBC with Matthew Wright. Why was there so much interest? The story was a spark, igniting a growing suspicion held by many: that there’s no cost of living crisis for the super rich. And that the very wealthy are not being fairly taxed. How is his tax rate so low? How does our tax system allow a multimillionaire to pay such a low rate of tax? In this case it comes down to capital gains tax. Most of Sunak’s earnings in this period (£1.8m) came from financial investments. When you sell shares you pay capital gains tax on any profits you’ve made. It’s likely that the Prime Minister paid just 20% tax on these gains. This rate is a lot lower than if he had earned £1.8 million through working. In this situation, Sunak would pay more like 45% in income tax alone. 20% vs 45%. That’s a big difference. It’s the key to understanding one of the ways in which very rich people pay much lower rates of tax than they should. This is deeply unfair. We’re campaigning to ensure that income from wealth is taxed at the same level as income from work. So if your income is £2.2 million a year from whatever source, you pay the same rate. Our research shows that in doing this we could raise up to £15 billion a year extra. |
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