Richard Jordan, Gateley Legal

Immediately after the recent publication of the findings of the Wealth Tax Commission, LinkedIn “lit up” with many well-known and highly respected peers expressing very strong views, both for and against a wealth tax.  I have a strong view, but I want to move the conversation along a level.

If you think we are talking about a wealth tax too much, take a trip to Italy (if you could). The Italian professionals advising UHNW clients debate/discuss the subject almost every day. The topic is presently being debated in several European countries but each of them, like the UK, faces the same dilemma.

Italy simultaneously seeks to continue to attract wealthy foreign families to establish themselves in the country by offering their own favourable form of the remittance basis of taxation.  Portugal is another extremely attractive tax haven option, and has the added advantage of an almost minimal commitment in order to achieve this “golden status”.  

Although Switzerland’s forfait arrangements demand more of a commitment, in practice they are relatively relaxed (based on my own clients’ experience). It is also hideously expensive to live there with the Swiss Franc as it is. Monaco has, perhaps, the strictest commitment of them all and it is also an expensive choice. 

But the point is this, there is a choice. Each of these countries is seeking to attract the spending and investment that the UHNW families bring with them whilst these countries rarely offer the same favourable taxation to their own citizens choosing to live there. 

One thing I hope that all the LinkedIn combatants can maybe agree on is that over the next several years we are going to see a significant amount of wealthy European families migrating for tax reasons. The relative fiscal competitiveness of each jurisdiction is being closely observed and analysed by families at present. Brits may migrate to Portugal or Italy, the French and Italians may relocate to London.

Despite Brexit, immigration under the Investor Visa is not complex. We are a tiny microcosm of the London private client sector, but we are already seeing a significant increase in enquiries from UHNW individuals looking to migrate to the UK from across Europe, driven by a desire to avoid capital taxes on the wealth they have worked hard to create and on which they have already paid significant tax.

All of the European tax havens (including the UK) are likely to continue to compete for this foreign inward investment, both on a corporate and personal level. The only reason the UK will suffer in this regard is if it ceases to be attractive, when compared to its European peers.  

This is why my view is that when UK Chancellor Rishi Sunak announces his budget on 3 March 2021, we are unlikely to see anything that undermines the UK’s fiscal competitiveness and attraction to foreign investment and migration. The Chancellor will not wish to spook the UHNWIs, stifle entrepreneurship or extinguish aspirations of wealth. 

Did I say I would hold my opinion? The money required to fix this mess quickly, and to help with levelling across the country exists. Unlike 2008, it has not gone anywhere, it is merely concentrated in a tiny percentage of fortunate businesses and individuals. Mr Sunak needs to spring a surprise, a simple and “one time only” capital levy on the individuals and corporations who are fortunate to be in position to pay.

The core Conservatives revolt? Nonsense. It will require less than two percent of the UK voters to fix this.  These individuals and businesses have a duty to step up as part of their social contract with society, but then they should be left alone again and provided with assurances that the UK will otherwise remain fiscally competitive year on year. If the UK loses its competitive edge, we are in a whole heap of trouble….