Nick Clegg has suggested a short-term emergency tax on the very rich, saying that those of “very considerable wealth” should pay more tax.
His suggestion is designed to ensure greater fairness as part of what he sees as a “longer economic war”.
The proposal for such a time-limited tax is in addition the long standing Liberal Democrat ambitions for a mansion tax.
We are pretty sure that those of very considerable wealth feel they are already making a significant contribution towards the national effort.
Figures from HMRC for the 2010/11 tax year show that the top 10% of earners already contribute 55.6% of all income tax payments. The top 50% pay 89% of all income tax receipts.
This is of course before any economic contribution from expenditure on goods and services, or job creation is taken into account.
There is a real danger that increasing tax rates for wealthy individuals will simply drive tax revenue out of this country. We have already witnessed the effectively neutral impact of raising the top rate of income tax to 50p.
Wealthier individuals should plan for a more taxing future, regardless of the progress made by these Lib Dem ambitions.
There has certainly been a backlash against tax planning, particularly aggressive forms of tax planning, already this year.
Whilst the more adventurous forms of tax planning are unlikely to succeed in the longer term (or be considered morally acceptable in the current economic climate), basic forms of tax and financial planning designed to make use of traditional allowances and exemptions should of course continue to be used where available.
Photo credit: Flickr/Liberal Democrats
