THE UK could have collected £170 billion more in taxes every year from 2011 to 2020 if increases in wealth had been treated the same as income, according to a new report.
Professor Richard Murphy, an expert in taxation and accounting, published the calculations as he launched a campaign for tax reform in the UK.
The £170bn estimate comes as Murphy aims to lay out more than 30 recommendations for changes encompassing “every single major tax in the UK at present” which could see billions more taken into the public purse annually.
The professor said there were three main reasons he had undertaken the work.
“The first is to show the green transition this country so urgently requires can be funded," he explained.
“The second is to show that, contrary to claims made by some politicians, there is money left to fund public services in the UK.
“The third is to inform public debate on public finances by showing the choices are available to politicians when they have to decide upon what level of public services to provide.”
Writing for The National at the end of August, Murphy said that he did not support calls for a wealth tax – instead backing reform of the existing system to bring in more from the wealthy.
He said on the publication of his Taxing Wealth Report 2024: “As someone who has been in tax practice for 40 years, I know all the difficulties that will be faced in trying to create, assess and collect such a tax.
“Valuing assets for taxation purposes is a nightmare. If it had to be done for even tens of thousands of additional people a year, HM Revenue and Customs’ resources will be stretched beyond their limit, and they are already close to breaking point.”
Everywhere you look there is reason for the UK government to spend more money. Health, schools, water, transport, housing and energy. But the government and Labour say there is no money left. That, I suggest, is simply not true. A thread…..
— Richard Murphy (@RichardJMurphy) September 6, 2023
In his new report, Murphy argues that increases in wealth are taxed at a fraction of the rate of income. He estimated that whereas income was on average taxed at 32.9% from 2011-2020, increases in wealth were only taxed at 4.1%.
Because the vast majority of the wealth is owned by the richest 10% of the population, Murphy said this differential creates a deeply regressive tax system, where the poorest pay far higher rates.
“If the tax rates on income and increases in wealth were equalised then additional tax revenue of £170bn a year might be raised in the UK as a result,” the professor said.
Murphy will also, over the course of the autumn, publish more than 30 recommendations on how existing taxes can be tweaked to better collect revenue from wealth.
The first proposal has been published alongside the new report, and related to pension contributions.
He said: “By simply capping the rate of tax relief available on pension contributions in the UK so that no one gets relief of more than 20% on the contribution that they make, I suggest that £14.5bn of extra tax revenue could be raised every year.”
Murphy said a key point behind the research would be to answer the question frequently raised by politicians and the media: “How will you pay for it?”
'There just, frankly, is no money left' Shadow culture secretary Lucy Powell says the Labour Party can't make promises it 'can't afford to keep' as she defends Keir Starmer's plan to keep the two-child benefit cap in place pic.twitter.com/SoT5rK2ttR
— ITV News Politics (@ITVNewsPolitics) July 18, 2023
He took particular aim at Lucy Powell, now Labour’s shadow leader of the Commons, who said in July while shadow culture secretary: “There just, frankly, is no money left.”
Murphy said there is “significant scope for additional tax to be imposed in the UK if the demand for government spending and fiscal policy requires it”, adding: “To put it another way, in a country where total wealth exceeds £15 trillion there is ample money left.”
You can read more of Professor Richard Murphy’s work on the Tax Research website.
