Evasive action
While wealth taxes might sound appealing, the government would raise more by cracking down on tax avoidance, argues Phil Brickell
Those of us on the left tend to be united by one simple idea: individuals with the broadest shoulders should bear the heaviest burden.
At a time when public services are stretched, government debt is almost 100 per cent of GDP, and millions of working families are squeezed because of conflicts abroad, making sure the wealthiest contribute their fair share has seldom been more important. This is why proposals for annual wealth taxes deserve close scrutiny. On paper, the siren call is attractive: impose a direct levy on multimillion-pound fortunes and raise billions of pounds for the Exchequer to spend on schools, hospitals and public infrastructure. The test of any tax policy, however, is not whether it sounds radical. It is whether it will actually work. I spent more than a decade countering tax evasion and other economic crimes in the banking sector, and it taught me an honest truth: a uniform wealth tax policy will not achieve its stated goals.
Just take a look overseas. The Wealth Tax Commission found that 12 OECD countries had wealth taxes in 1990. Fast forward to today, and only a handful remain. France abolished its broader wealth tax in 2018. Sweden repealed its version in 2007. Germany abandoned its own tax after constitutional and administrative problems. Denmark, Finland, Austria and Luxembourg scrapped theirs too. Why? Because they repeatedly ran into the same problems: low receipts, high complexity, concerted avoidance and significant capital flight. When proponents of wealth taxes make claims about the amount of cash up for grabs, they assume there will be no behavioural response whatsoever. It’s as if they expect the super rich will simply sit still and accept a new annual levy on their assets. Some may, but most won’t. Extreme wealth in 2026 is incredibly mobile. Just look at Reform UK’s big money donors, based in Thailand and Hong Kong, who have been able to pump tens of millions of pounds into British politics without being resident in the UK or having tax obligations back home.
The super-rich have access to lawyers, accountants and offshore structures ordinary taxpayers can only dream of. They can relocate assets, change residency, exploit loopholes and restructure owner-ship using trusts, foundations and offshore accounts to minimise liabilities. The solution is not to impose further taxes which will be aggressively avoided or even evaded. It is to increase our dismal tax take from the existing plethora of levies which already exist. Simply put: too much tax already owed goes uncollected.
HMRC estimates that the tax gap – the difference between what is owed and what is paid – stands at about £47bn. Small businesses account for around £28bn of missing tax revenue, followed by criminals and then the wealthy. That £28bn alone dwarfs many of the speculative projections attached to wealth taxes. At the same time, HMRC appears to not even know the scale of offshore tax abuse – an issue it urgently needs to address.
So why talk about inventing entirely new taxes when we seem unable to collect the ones we already have? This is where the real debate should be. For years, Tory governments weakened tax enforcement capacity while allowing the tax code to become increasingly labyrinthine. They even went as far as abolishing the Office of Tax Simplification.
Meanwhile, sophisticated tax evasion schemes peddled by rogue advisors continue to operate through shell companies, opaque ownership structures and offshore arrangements. The imbalance is glaring: ‘small fry’ workers face relentless scrutiny for minor mistakes while the wealthiest can often deploy armies of professional enablers to game the system.
The all-party parliamentary group on anti-corruption and responsible tax, which I chair, has outlined a far more credible route forward: properly investing in HMRC investigators, strengthening Companies House verification powers, improving beneficial ownership transparency, cracking down on dodgy tax advisors and expanding whistleblower incentives for exposing large-scale tax evasion. I am delighted that some of these proposals have already been adopted by the government, but I think we can and should go further.
These might not be flashy policies ripe for distillation into pithy soundbites. But they target the structural weaknesses that allow wealth to escape taxation in the first place. The choice is not between doing nothing and imposing a wealth tax. There is another path: simplify the system, close loopholes, strengthen enforcement and make sure existing taxes are actually paid.
This may sound less radical. But if the goal is genuinely to make the richest pay their fair share and improve the lives of ordinary people, it is far more likely to work.
