Wednesday, August 29, 2012

The Lib Dems and Taxing Assets

Tax (Photo credit: 401(K) 2012)

Despite the stormy summer weather, Nick Clegg is flying a kite this week. At least, he's raised the issue of a short-term asset tax as part of the coalition's plan to  reduce the public finance deficit over the coming years.

I have mixed feelings about the idea. On the one hand, I agree with the principle of shifting the burden of taxation from wealth (profits generated from productive labour) to assets (tangible items capable of generating wealth). I am particularly interested in the issue of land-based taxation as an alternative to income tax , and note with interest that Ireland is one of a growing number of countries looking at this possible model for raising public revenue.

On the other hand, the current suggestion by the Lib Dem leadership appears flawed in two respects. Firstly, if it is to be a tax on all assets, this will prove very difficult to administer as it depends on asset holders accurately and honestly declaring the financial value of such intangible items as intellectual property, stocks and shares, pension funds as well as land and property. 

Secondly the idea has been put forward as a short-term policy - a means of raising some temporary cash. It is not a serious attempt to implement a more equitable arrangement that lowers the gap between the super-rich and the poor over the long term.


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