As published on thisismoney.co.uk, Tuesday 5 January, 2021.
The Government is being urged to reform the UK's tax system before pushing ahead with a controversial levy on wealth.
Chancellor Rishi Sunak should focus on sorting out 'badly designed' charges such as pensions tax, council tax, inheritance tax and capital gains tax before introducing yet another levy, the Institute for Fiscal Studies (IFS) has warned.
It comes after the Wealth Tax Commission, made up of economists, lawyers and academics, suggested a tax on people with assets of more than £500,000, or £1million for a couple, including their family home and pension.
Sunak has the task of trying to raise more money for the Treasury coffers, to help pay off the £2trillion debt accumulated during the pandemic.
Paul Johnson, director of the IFS, said: 'We have a series of taxes on wealth or things close to wealth – tax on pensions, council tax, inheritance tax, capital gains tax. The first priority should be to sort these out.
'They are all badly designed and could be made more efficient and more equitable and raise more money, though not vast amounts more.'
A wealth tax has proved unpopular with many homeowners who would not class themselves as rich, but who may have bought a house several years ago which has appreciated in value.
Johnson said: 'People often mean very different things by wealth taxes. Most of us have most of our wealth in houses and pensions. Do we want to catch millions in a tax on their house and pension?
'If not, it's hardly fair to tax people who have money saved in other ways. Or do we just want to get at the wealth of the really wealthy? If so, how wealthy? And how do we stop them avoiding it?'
Rachael Griffin, of investment firm Quilter, pointed out that valuing people's homes, pension policies and stakes in family businesses would be incredibly difficult.
She said: 'The tax would surely generate significant opposition, and risks sending out the wrong message. Government will be keen to project confidence and promote investment as the country seeks recovery from this crisis. A 'soak-the-rich' approach is unlikely to do much to achieve this.'
But a report by the IFS this week laid bare just how badly poorer communities have been affected by the pandemic, which could increase pressure to charge the wealthy.
The IFS Deaton Review of Inequalities, chaired by Nobel Laureate Sir Angus Deaton, found the proportion of people dying from Covid-19 has been around twice as high in the UK's most deprived communities as in the least deprived.