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An investor's take on tax

All through the pandemic, there was never any doubt that one day a tax reckoning would be required, to help get borrowing back under control. And while the post lockdown mood may have changed from relief to apprehension given the spiralling cost of living, the fact remains that the chancellor has a unique opportunity to shake up tax.

A few weeks ago I asked readers for their views on tax. I received plenty of responses, many of which expressed frustration that debates around taxation, and funding of the NHS, too often descend rapidly into tribal shouting matches. But clear messages emerged. Here is a small selection.

Pensioners should be asked to contribute more. The welfare state was designed for a different era when life expectancies were shorter, commented Mike B, who believes that the higher funding costs should fall on the elderly, or their estates, “not young workers who are hit by a lack of pensions, inflated house prices and university fees”.  Most of you agreed that pensioners should pay National Insurance (NI), and also that NI and income tax should be merged.

Guernsey pensioners, points out Gerald H, pay a 3.8 per cent social security health tax on top of income tax. Ninety-year-old John D says he and his friends agree that more of the burden should fall “on folk like us, comfortable, with good incomes, no mortgages, free NHS, substantial pensions and [sitting on] capital gains”.

The rich should also pay more. “For people in the top quartile, and even below that taxes are not a burden – there are too many ways to avoid and evade,” said Rosemary S. David L favours a flat rate for pension relief: “I have benefited from the higher rate, but I would have saved regardless. It seems unjustifiable to give more benefit to higher earners.”

There was also strong appetite for treating all income as earned income. “The treatment of unearned income as some kind of lottery win must cease,” says Peter P.

“Earned and supposed unearned income? It’s all income and should be taxed at the same rate,” says Paul E. “This includes dividends taken by directors and partners. No more aggravating and society-splitting loopholes.”

Terence L agrees: all types of income should be added together, while Stuart F would like to see harmonised tax rates for income and capital gains.

Property provoked a range of views. James L, a holiday-let owner believes he should be paying more tax and that second home owners who are not letting all year round distort local communities and bring little economic benefit: “They should be paying punitive annual tax rates.” Mark S concurs: it is a scandal that second homes are not more heavily taxed.

Others suggested all property should attract more tax, starting with council tax. “The only real asset you can’t move or hide is housing,” says Geof C. Robert P agrees and says property taxes are the way forward.

There was little sympathy among those in favour of higher property taxes for the mythical old lady in a large house: “If she can’t afford to live there, she should move.”

Richard C says that “one wealth tax which can work as one sees in the US” is that of higher rates of tax on high value properties. A carbon tax too, he suggests, might raise revenues and nudge people to use less of the stuff.

He believes the UK "isn't rich enough to pay down the Covid-19 debt, increase healthcare and social care and meet our carbon emission targets. We must make choices,” a point echoed in David L’s comment that “We have been taxed too little. We are all shareholders in UK plc and must address these issues.”

Some of you would like an overhaul of inheritance tax. Roger R and Stuart F say it is wrong that children can inherit a fortune free of tax.

There is no space here to discuss the many views expressed on the NHS (and education), but among you there is strong support for a combined health insurance/state funded model.