The petition of residents of the United Kingdom,
Declares that proposals to introduce higher taxes on the super-rich as a step to tackling the widespread poverty and inequality that scar our society should be considered; further that the covid-19 pandemic has not only shone a spotlight on the huge inequalities in our society—it has deepened them; notes that in May the Sunday Times rich list revealed that Britain's billionaires have increased their wealth by £106 billion during the pandemic—that's £290 million per day; notes that, in contrast, a record 2.5 million food bank parcels were given to people in crisis in the past year; declares that as we come out of this pandemic, if we are to learn the lessons and build a more equal and more inclusive society, then we need to acknowledge that trickle-down economics is flawed and decades of failing tax policy must be tackled.
The petitioners therefore request that the House of Commons urge the Government to take into account the concerns of the petitioners and review proposals to introduce a wealth tax intended to raise tens of billions from the wealthiest in our society, a windfall tax on corporations that made super-profits during the pandemic and a more progressive income tax system including a new 55% income tax rate on all income over £200,000 per year, a 50% income tax rate for those on over £123,000 and 45% rate for income over £80,000.
And the petitioners remain, etc.
—[Presented by Richard Burgon, Official Report, 21 July 2021; Vol. 699, c. 1100.]
Observations from The Financial Secretary to the Treasury (Jesse Norman):
The Government thank the hon. Member for Leeds East (Richard Burgon) for submitting the petition on behalf of his constituents about the tax system.
The Government are aware that the Wealth Tax Commission, which has no connection to the Government, considered the case for a wealth tax in the UK. The Wealth Tax Commission rejected the idea of an annual wealth tax for the UK, and instead proposed a one-off tax. However, it acknowledged that levying even a one-off tax would be a hugely complex undertaking, and that the amount of revenue raised would be highly dependent on the final design of the tax. The Wealth Tax Commission notes that in considering Inheritance Tax, Capital Gains Tax, Stamp Duty and Stamp Duty Land Tax, the Wealth Tax Commission found the UK is among the top G7 countries for wealth taxes as a percentage of total wealth.
The UK system is designed to ensure among other things that the richest in our society pay their fair share on their wealth and assets, with the tax system taxing wealth across many different economic activities, including acquisition, holding, transfer and disposal of assets and income derived from assets.
These tax levers generate substantial revenue, including Inheritance Tax revenues of £6 billion, Capital Cains Tax revenues of £8.7 billion and property transaction taxes of £12.3 billion (Budget 2021 forecasts for 2021-22).
The Government have also taken steps to ensure that the most well-off continue to make a fair contribution, reforming the taxation of dividends, pensions and business disposals to make the tax system fairer and more sustainable. At Budget 2021, the Government also announced it would maintain the Inheritance Tax nil-rate band, the annual exempt amount for Capital Gains Tax, and the pensions Lifetime Allowance at their 2020-21 levels until April 2026.
The Government also believe that it is right that businesses should share in the burden of restoring the public finances to a sustainable footing. That is why the Government announced an increase in the rate of Corporation Tax at Budget. The rate increase will not come into force until April 2023, by which time GDP is forecast to have recovered to its pre-pandemic level. The approach the Government have announced will help to protect the smallest businesses while raising over £45 billion over the next 5 years from a main rate at 25 per cent that is still the most competitive in the G7.
Companies with small profits, that is, those companies with profits of £50,000 or less, will continue to pay 19 per cent. That means that around 70 per cent of actively trading companies will be protected from a rate increase, that is around 1.4 million businesses. That compares to a rate of 21 per cent they were paying when the previous Government was elected in 2010. Companies with profits below £250,000 will pay less than the main rate. That means approximately 90 per cent of actively trading companies will not pay the full rate, around 1.8 million businesses.
Those companies that have made profits during the pandemic have continued to pay Corporation Tax on those profits as normal. Corporation Tax is charged in line with the level of a company’s profits so more profitable companies will have contributed more.
For similar reasons of fairness, the UK Income Tax system consists of three progressive rates of tax, which sit above an internationally high personal allowance. The top 1 per cent of income taxpayers are projected to pay 28 per cent of all Income Tax and the top 5 per cent over 48 per cent of all Income Tax in 2021-22. In April 2021, the Government increased the personal allowance to £12,570. The Government has raised the personal allowance by over 90 per cent since 2010-11, ensuring more of the lowest earners do not pay Income Tax at all.
Whilst raising the highest (Additional, currently 45p) rate of Income Tax may look attractive, HMRC’s report “Exchequer effect of the 50p rate” (March 2012) concluded that, although there is uncertainty around these estimates, the yield from the previous Additional Rate at 50p was much lower than originally forecast. HMRC estimated the 50p rate yielded less than originally forecast (yielding around £1 billion or less), and that the yield could be negative.
The Government keep all aspects of the tax system under review, and any decisions on future changes will be taken as part of the annual Budget process in the context of the wider public finances.