Lootman wrote:Gengulphus wrote:Lootman wrote:Having now watched about half of the presentation cited above, I can already see several holes in their arguments. Just three examples:
1) They claim that the wealth tax can simply be "deferred" if you are asset-rich but cash-poor. But in such a case there is no revenue now, which is surely the point of a tax that targets the alleged Covid deficit? And such a deferral gives the taxpayer many years to liquidate and finesse.
Not having watched the presentation, but having skimmed most of the paper and read in detail the bits I was particularly interested in (which incidentally I usually find to be a much quicker and more informative way of learning about proposals than watching presentations), I think they're only proposing deferring
payment of the tax, not
assessment of it. E.g. elderly people living in a £1m house but with only just enough income to live in it (including paying the council tax on it) would still have wealth tax of £25k+ assessed on it plus the value of their other assets (assuming a £500k threshold and 5% rate), and that assessment would not be altered by what they subsequently did, but paying that wealth tax could be deferred until the house was sold, by making it a charge on the house. That doesn't give any more time to "liquidate and finesse" - but there are of course potential problems with it if the asset concerned somehow has its value destroyed while the tax is still being deferred...
...
Actually I missed the part (perhaps it was in the document but not in the half of the presentation I watched) where it was stated that HMRC would take a charge against your home for the assessed taxes in those cases where it must be deferred. I did see a reference to deferral until the taxpayer was drawing his pension for those cases where the "wealth" being taxed is a pension, which makes sense I suppose. And there was talk of a deferral until a later time in other "asset rich; cash poor" cases. So I had assumed that the deferred tax due was annotated as a tax debt, but not that charges were placed against assets which, more generally, only happens when a tax payer is delinquent rather than merely deferring the tax by mutual consent.
I don't think they actually made a specific proposal that a charge would be taken against one's home - they left a lot of the details of how their Statutory Deferral Scheme would operate to be filled in. So the details of the example were mine - sorry not to have made that clearer. But the way that their minds are working seems pretty clear in the case of pensions - allow deferral until the taxpayer has access to the funds, and then collect it as automatically as possible, and charges on houses are the standard mechanism to collect payment automatically when a house is sold, so I don't think it's an unreasonable assumption on my part that they might be thinking of doing that. And while it would IMHO be unreasonable for a government to take up this idea, that won't necessarily prevent it doing so, and I don't think it at all unreasonable to assume that
if a government were to do so, they would at least think of using a charge on the house to increase their certainty of collecting of the wealth tax due.
Also, they do mention the possibility for the asset-rich-but-income-poor of borrowing against the asset to pay the tax. In the case of a house, that would mean taking out a mortgage on the house - so at least when that's done (it won't always be desirable or even possible), they are thinking of a charge being taken against the house, it's just that the government has effectively outsourced the taking of the charge!
Lootman wrote:So if you are correct about the idea of putting some kind of lien or charge against a home then, yes, it would be harder for a taxpayer to avoid the eventual tax. But there are still problems, one being the care home issue raised by others, where the central government and local government might be squabbling over the same asset. Another being any mortgage outstanding on the property.
Agreed that there are still those problems - though they will tend to be alleviated by the netting-off of debt in their wealth calculation: if there are already large charges against the house, then for there to be wealth tax due at all, there need to be substantial other assets as well, making it more likely that the assessed wealth tax can be paid.
Just to make it clear, by the way, I am
not arguing in favour of this proposed wealth tax. What I'm posting is in the spirit of "
Know your enemy", "
Anticipate your enemy's arguments" and "
Avoid attacking your enemy with weak arguments - doing so just gives them an opportunity to score points".
Lootman wrote:Gengulphus wrote:I don't really need any more evidence for that than the fact that they seem to believe a government could spring such a wealth tax on the population without word that they were planning such a move leaking widely, especially among the wealthy.
Agreed, but what I have seen attempted is that a tax change is made retrospective to the date it was first introduced.
So have I - and not just attempted, but actually done. That's why I said "leaking" - it's easy to deal with the fact that Parliament will have to debate and approve a new tax after it has been announced publicly by making it retrospective to the announcement date, it's much harder to deal with insiders in the tax-policy-formation process leaking details of and/or hints about what is being planned to their friends...
Gengulphus