Wealth taxes
Summary
You can’t tax what isn’t there!
Wealthy people are mobile.
Wealth is mobile.
The only form of wealth that isn’t mobile is land.
Switzerland and Norway have wealth taxes but – they haven’t brought in anywhere near the amount expected and they have cost a fortune to enforce. It is worth following these links for Norway and Switzerland.
The wealthy fled Norway (which has a direct wealth tax) for Switzerland (which has a direct wealth tax). Reason? Overall, they pay less tax in Switzerland than in Norway.
So, unless you are willing to compete with Switzerland on general low taxes, the wealthy will probably leave the UK when a wealth tax is introduced.
Direct wealth taxes:
are complicated, they increase the size of the tax code (lawyers love them),
are easy to avoid. E.g. trusts, leaving, complex company holdings, tax havens etc.
are very difficult and expensive to enforce,
taxes something which is abstract, nebulous, hard to define: “wealth”,
are discriminatory, they are seen as “punishing those with enterprise”,
encourage avoidance and even criminality,
those with the best and most devious lawyers avoid the most tax,
and, of course, the wealthy may leave and take their wealth with them (*),
Land Value Tax - an indirect wealth tax:
is simple - easy for everyone to understand (lawyers hate it),
reduces the size of the tax code by replacing other taxes,
taxes the value of land, not people,
is fair, those with the most, contribute the most,
is easy and cheap to enforce - freeholders pay the LVT, no matter where they are,
you can leave and take your other wealth - but you can’t take land,
taxes something very specific - the land we, as a society, own and share,
taxes something we can see, which can’t be moved (*) or hidden,
is impossible to avoid - the land is here and we know the freeholder,
enables us all to benefit from the thing that makes up 60% of our national assets.
* this is a free country - though no longer as free as it used to be. The wealthy are free to leave, repatriate any funds held overseas, settle up with HMRC, surrender their passports, give up their citizenship and go to whichever country will have them. They can also live outside the UK without giving up citizenship. Either way, they can’t take their land and we will still benefit from the Land Value Tax due on it.
We already tax wealth!
Land Value Tax can’t do everything, it isn’t a panacea. Other reforms are required.
We already tax income - that includes income from dividends on shares.
We already tax capital gains - when people sell their shares or other assets. CGT needs to be brought into line with Income Tax
There are simple ways to improve the taxes we already have that apply to wealth.
We strongly recommend reading Richard Murphy’s Taxing Wealth Report.
The wealth tax proposal
One party has proposed 1% on all assets over £10 million and 2% on all assets over £1 billion.
At first glance, without thinking about it carefully, this seems a pretty good idea – and it is certainly popular (unless you are wealthy!)
The UK tax code (law) contains over 10 million words making it 12 times the size of the complete works of Shakespeare, 12.5 times the size of the Bible and 66 times the size of the Hong Kong tax code.
Wealth taxes are incredibly complicated and would probably add another million words to the code. Apart from this they are easy to avoid and impossible to police.
Many countries have tried them and most countries have abandoned them.
Land can’t be hidden or exported. Freeholders have to pay Land Value Tax - no matter where they run to!
Wealth taxes are a job creation scheme for tax avoidance lawyers and accountants.
Armies of forensic accountants are required to dig behind the complex schemes that hide wealth or hide the ownership of wealth.
Sorry about the AI generated image below - we just couldn’t resist! We know some really decent lawyers, but …
What is wealth?
Surely this is easy, after all The Sunday Times publishes a rich list every year!
The list contains estimates from a range of public information and the editors state:
"We measure identifiable wealth, whether land, property, racehorses, art or significant shares in publicly quoted companies. We exclude bank accounts—to which we have no access... We try to give due consideration to liabilities."
There is a huge difference between the sensationalist guestimates published in The Sunday Times and reality. No doubt billionaires gain bragging rights by being high in the list but that would soon change if they realised that the higher they come, the more they will pay.
They, and their wealth, will disappear overnight!
Wealth is usually defined as “net asset value” or “net worth”. The total value of all assets minus the total value of all liabilities.
Some assets are easy to see, James Dyson’s 36,000 acres are hard to hide and Rod Stewart’s collection of Ferraris is well known! Others are much easier to hide – sometimes physically (yachts can be registered and parked anywhere in the world, as can private jets), sometimes behind complex networks of companies and trusts registered all over the world – especially in tax havens.
Sometimes the rich don’t even “own” their own wealth! They take an income from it or rent it from a trust, a charity or a company over which they claim to have no direct control!
An example
Peregrine Andrew Morny Cavendish, 12th Duke of Devonshire, doesn’t “own” Chatsworth House in Derbyshire – he lives in an apartment within it. He set up a trust to “own” the house and the trust leases the house to a charity (to get tax breaks on entrance fees from the public) and Peregrine rents his apartment from the charity. He is a trustee of the charity and his son, William Cavendish, Earl of Burlington, owner of Pratts Club in London, is the chairman - he lives on another Cavendish estate of 8,000 acres at Lismore Castle, County Waterford, Ireland.
Despite Chatsworth having over 600,000 paying customers each year, and himself being worth at least £1 billion (though it is hard to pin down exactly what is his, what belongs to his offspring, what is “corporate” and what is in trusts etc.), Peregrine still has his begging bowl out to repair the cascade.
In October 2024 Peregrine ceased to be a person with significant control of “Charco 1527 Limited” (an “open-ended investment company”). His place was taken by his son – possibly to avoid inheritance tax.
“Charco 1527” is a “member” of at least 5 different LLPs “BRIP 6”, “BRIP 7”, “BRIP 8”, “BRIP 9”, “BRIP 10” each of which has dozens of “members”. All are run by Barwood Capital.
LLPs are notorious for being used to avoid tax.
The inventiveness of clever tax avoidance lawyers should never be underestimated.
Nothing above done by the Cavendish family appears to be illegal but it serves as an example of how difficult it is to tie down “wealth” and who it belongs to. In their case, everything seems to be within the UK but imagine how difficult it would be if it was spread across multiple countries and tax havens – as is the case with the JCB empire.
The Grosvenor family, Dukes of Westminster and friends of William the Conqueror, have land holdings all over the world - they are a property multinational and they make big use of trusts to ensure that their estates are not broken up and taxes are avoided.
Who reports wealth?
HMRC knows about bank accounts, building society accounts and pension funds. Beyond that things quickly become vague - so who is going to find out what wealth belongs to whom?
A wealth tax is is self reporting.
It assumes that the wealthy will sit down, with their lawyers, and draw up a complete list of their assets along with their current value.
How do we decide who has to fill in such forms? Do we all have to do it?
Is it possible that the wealthy might underestimate their wealth - or even tell fibs?
“Oh, those few million! They’re not mine, they’re in a trust fund for my children by my first wife.”
Wealth is relatively easy to hide
Apart from physically hiding things (gold is at a record high at the moment!) there are lots of tools available to smart lawyers. For example:
trusts (in the UK or in tax havens),
hiding assets behind companies registered outside the UK
non-dom status (“not resident in the UK for tax purposes”).
The sort of decent, honest, well-meaning people who propose a wealth tax simply underestimate the greed, selfishness and power of many (most?) wealthy people.
How is the tax enforced?
Other countries have found that it is incredibly expensive to administer and it brings in a fraction of the amount expected. Almost every one has abandoned it.
It is impossible to police. It would need tens of thousands of additional staff at HMRC knocking on doors. “The Under The Bed Squad!”
A charter for whistleblowers
In March 2025 Rachel Reeves, the Chancellor of the Exchequer, announced that whistleblowers who inform HMRC about tax-dodging will get a cut of any money collected as a result.
“‘ere, that chap at Number 9 has a couple of Lamborghinis parked in his garage!”
Imagine the amount of time wasting and score settling that will go on!
Maybe …
Given all the hassle of wealth taxes, it might be simpler to ask “the rich” to make a voluntary contribution of additional tax. Easy to do and probably equally ineffective.
A far better way
Land Value Tax is an indirect tax on wealth since most wealthy people invest, directly or indirectly (like Peregrine Cavendish), in property and land.
LVT is simple to understand - and by scrapping local taxes it reduces the size of the tax code.
LVT is fair - it spreads the cost of Local Authority services fairly across the country.
LVT is impossible to avoid - you can’t hide land - so it costs almost nothing to enforce.
LVT creates very unhappy lawyers - but there’s a downside to everything!