The woes and throes of wealth tax: should the UK take the lead from Spain?

September 22, 2011 Categories: Money

The Spanish wealth tax, abolished just before the recession of 2008, is to make a comeback. This is the latest austerity tactic instigated by José Luis Rodríguez Zapatero. The tax is applicable to those Spaniards who possess 700,00 euros worth of assets in real estate (that is, excluding their main place of residence) as well as in stocks and bank deposits. The tax is thought to affect 160,000 Spanish people.
The tax will exclude the middle classes (who had been affected by it before it was abolished in 2008) and will see the wealthiest in the country touched by the austerity regime felt by those much poorer than themselves. Indeed, the tax’s re-instalment is viewed as a justified move when the vast majority of the country’s population are suffering from austerity measures which the richest remain immune to: pensions, salaries, lay-offs and income tax or VAT hikes.
Currently, few of the wealthiest Spaniards declare their annual taxable income as they should. This new tax should, so says Zapatero, exact a sum of 1.08 bn from those that have most in order to help those that need it most, notably the struggling Spanish local regional governments, where the majority of the money exacted shall be directed.
However, collection of this new tax is the individual responsibility of those bespoke local governments. It remains to be seen which take it up, especially the government in the wealthiest area of Madrid, although all governments are highly recommended to do so. They will of course be under intense pressure to apply the tax; only the right-wing administered government of Extremadura has so far agreed to apply it. More, assuredly, shall follow.
Perhaps such a move could be introduced in the UK while talk about abolishing the 50p income tax on the wealthiest rarely fails to provoke heated debate. This wealth tax takes into account the relative affluence of the individual on the basis of assets aside from their main place of domicile, rather than a simple income based assessment. It could be worth a try, in any case. This slight change in the means of wealth evaluation could well find a better reception here.
It remains to be seen how successful this European move is. While fellow well-off EU comrades in Germany and France have already proved willing to share the fruits of their financial success in this period of monetary dearth, the same cannot be said of their British counterparts. Maybe this rather similar concept of a tax on the richest (which would, most probably, affect less people than the current 50p tax rate) might provide us with an alternative to what is an interminably contentious subject at the moment. The wealthiest Britons among us might find this form of taxation preferable on the basis of its alternative assessment criteria, while those opposed to cutting the 50p tax rate would be concomitantly appeased.