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More countries use wealth taxes to ease cost of living crisis

taxman people running
taxman people running

The rich are increasingly being squeezed by wealth taxes as governments raise levies to pay for cost of living support.

There was a “notable increase” in countries increasing net wealth taxes and property taxes last year, the Organisation for Economic Co-operation and Development (OECD) said in its latest report on tax policy reform.

It comes amid growing calls for a wealth tax to be introduced in the UK.

Spain imposed a temporary “solidarity tax” for 2022 and 2023 on residents worth more than €3m (£2.6m) to help the government cope with the cost of living crisis.

In November 2022, Colombia’s Congress approved a bill establishing a permanent wealth tax for individuals with a net worth over approximately $642,000 (£515,000). The levy, which replaces a temporary wealth tax in place during 2020 and 2021, sees individuals taxed at between 0.5pc and 1pc. A higher 1.5pc rate will also apply until 2026.

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Chile, meanwhile, has introduced an annual 2pc tax on certain luxury goods held in the country, such as yachts, automobiles and helicopters.

France, Norway and Switzerland are the only other countries in the OECD that have a form of wealth tax. This year Norway increased its higher rate for those worth between Nkr1.7m (£130,000) and Nkr20m (£1.5m) from 0.95pc to 1pc, a move credited with driving some of its super-rich to abandon the country.

Many governments also introduced property tax reforms, the OECD said, by raising top property tax rates or targeting individuals who use property as an investment vehicle.

Last week a group of nearly 300 millionaires, including heiress Abigail Disney, wrote to the G20 calling for a tax on the super-rich.

The letter said: “Decades of falling taxes on the richest, based on the false promise that the wealth at the top would somehow benefit us all, has contributed to the rise in extreme inequality.”

Labour is under pressure from backers to introduce a wealth tax if it comes to power, even though shadow chancellor Rachel Reeves has said the party has “no plans” to introduce such a levy on the country’s wealthiest.

The general secretary of the Trades Union Congress (TUC), Paul Nowak, has said there must be a “national conversation about taxing wealth”.

A tax on the richest 0.3pc of the population could deliver £10.4bn, according to the TUC’s analysis.

But critics have said their proposals would be expensive to administer and potentially damaging for the economy.

Robert Salter, of accountancy firm Blick Rothenberg, said that many of those caught by a wealth tax would be “asset rich and income poor” property owners in London and the Southeast.

He added: “The TUC is correct to call for a ‘national debate of taxation’ – the reality is that all countries as well as the UK should be continually reviewing their tax systems, to ensure that the rules are clear, taxes are efficient and easy to collect, and the tax burden is balanced fairly across the population.

“However, the UK tax system is already extremely complicated and introducing a new tax could just compound the difficulties and complexity of the system and are unlikely to solve the UK’s financial and structural problems.”