FOR ALL their wealth, ultra high net worth (UHNW) individuals are a tiny minority, with little clout at the ballot box. Labour’s proposed mansion tax on homes worth over £2m is just the latest assault on the super rich, who have become an easy target for politicians; the top 1 per cent of earners already pay 30 per cent of all income tax collected in the UK.
Should we care? It may not be a very fashionable case to make, but I believe we should worry about driving away this much-maligned community.
One hundred and four billionaires live in the UK, and London is now the global capital for the super rich. They spend an estimated £16bn here every year, which means that they contribute a whopping £3bn in VAT alone.
This doesn’t include all the non-resident billionaires who come here to visit and to shop. They are criticised for owning empty properties across Westminster and Kensington & Chelsea, but these two boroughs alone contributed £708m in stamp duty land tax in 2013, more than Scotland, Northern Ireland, Wales and the north of England put together. It is often said that foreigners pay no tax in Britain. This is simply not true. The average non-dom pays £55,000 a year.
If you’re super rich and you were born abroad, you could just as easily return home if tax demands become too draconian. We should worry about that. Everyone UHNW individuals employ pays tax: nannies, chauffeurs, cleaners and cooks. And everyone they engage, from builders and plumbers to gardeners and restaurateurs, pays income tax and VAT on what they receive.
Property is already taxed punitively; stamp duty is as high as 7 per cent – it’s 15 per cent for some companies buying residential property in the UK – and that’s without factoring in council tax and capital gains tax. If the mansion tax – which, it is claimed, would bring in £1.2bn a year for the NHS – proved the final straw for some UHNWs, persuading them to sell up and leave, what would be the impact on the economy and tax take?
Some of the heat might come out of the London housing market and that would please buyers who feel they are being squeezed out, but the flip side would be the resultant fall in stamp duty, capital gains tax and Annual Tax on Enveloped Dwellings.
If wealthy foreigners don’t have a property in the UK, they’ll visit less often and therefore spend less here, with a consequent reduction in the Treasury’s VAT take. They’ll employ fewer staff, leading to a drop in national insurance and income tax receipts, not to mention the impact on high-end shops, the leisure industry, wealth advisers and anyone else whose target market is the UHNW community.
If the impact of the mansion tax is to diminish the Treasury’s overall tax take, then is it worth it? If we take the easy option of bashing the super rich, rather than valuing their contribution to our economy, we will all end up poorer.