Wealth tax would make the UK the worst OECD country to own property in – CPS

The UK would be the worst country in the OECD to own property in if a wealth tax was introduced, the Centre for Policy Studies (CPS) has warned.

The Tax Foundation’s latest International Tax Competitiveness Index ranked the UK 30th out of the 38 OECD countries for the competitiveness of its tax system.

Analysis from the CPS modelled two tax changes the Chancellor has been encouraged to consider at the upcoming Budget: introducing a wealth tax and aligning capital gains tax (CGT) with the 45 per cent income tax rate.

While the think tank noted that increasing the higher rate of CGT would see the UK fall to 32nd on the list and would likely cost the Treasury money, Chancellor, John Healey, has reportedly rejected calls to equalise the rate with the 45 per cent income tax bracket.

Meanwhile, the CPS argued that introducing any form of wealth tax would be damaging to the UK’s international standing.

Four OECD countries currently have a wealth tax and three have a partial one, with the think tank noting that wealth taxes had been shown to discourage investment and entrepreneurship while raising little revenue.

It estimated that a wealth tax would move the UK from 33rd to 38th on property taxation, and from 30th to 35th for its overall tax regime.

According to the International Tax Competitiveness Index, the UK ranked first for cross-border taxation.

However, it was weaker elsewhere, including 25th for corporate taxation, 22nd for individual taxation, 33rd for property taxes and 34th for consumption taxes.

The VAT base covers 46 per cent of consumption, compared to the OECD average of 55 per cent, while its business VAT registration threshold is £90,000, higher than the OECD average of around £40,000.

“Rather than paying any attention to fiscal discipline, the Chancellor is likely to use his upcoming Budget to raise taxes in a bid to fund Labour's ever-growing spending pledges,” said CPS head of economic and fiscal policy, Daniel Herring.

“The UK already has a tax system which does little to encourage growth and the options mooted would cause further damage to the economy, and our international standing.”

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