Why such little fuss regarding the IMF’s ‘wealth tax’ proposal?
Nobody likes paying more tax than they are required to by law. And understandably, many savvy people use the available, bona fide specialist financial vehicles to become as tax-efficient as possible.
So it is surprising to my mind that there has not be much more furore regarding the International Monetary Fund’s (IMF) suggestion last autumn to introduce a new, far-reaching wealth tax of as much as 10 per cent on everyone. Yes, on all private wealth worldwide!
Why aren’t individuals talking about this more? Why are commentators and economists publicly debating the notion more? Why isn’t the media reacting to this proposal more?
Maybe the lack of commentary is because the report, the 110-page ‘Fiscal Monitor Report’ was (perhaps deliberately?) released in October – when the news agendas were jammed with the federal shutdown, the Obamacare controversy and major natural disasters, amongst other important, newsworthy issues.
In this paper, the IMF states that “persistently high debt ratios in advanced economies… cast clouds on the global fiscal landscape.”
The report goes on to highlight various ways of tackling this international challenge before asserting that “taxes on wealth… offer significant revenue potential”, and hints at “one-off capital levy” as a solution.
It goes on to back-up its suggestion by claiming that the eurozone’s debt levels would be reduced to the levels they were before the global crash of 2008 with such a ‘one-off levy’ on all those with a “positive net wealth.” This would require, according to the IMF, a tax rate of about 10 per cent.
Clearly, there are a host of sound arguments against such a tax. One of the few media pundits to have flagged some of them up is Forbes magazine’s Bill Frezza, who noted: “[The proposal] means that all households with positive net worth — everyone with retirement savings or home equity — would have their assets plundered…It would merely ‘restore debt sustainability’, allowing free-spending sovereigns to keep tapping the bond markets until the next crisis comes along.”
Now, as people evidently do not want to pay more tax than they are required to, as people think they already pay too much, and as people quite rightly look for ways to mitigate their tax burdens, this should raise the alarm that it would be madness to implement another predatory tax.
It is good economics, as we are seeing today and have seen throughout history, that in most cases it is better to collect as much tax from lower rates – otherwise the taxmen will simply get a larger slice of a considerably smaller pie.
Whether the IMF’s proposal will come to effect remains to be seen, but the fact it has been made at all and is ‘out there’ should be of concern to most individuals.
Nigel Green deVere Group
Blog written 27th Feb
As one pundit said, perhaps only half-joking: “This is why it is called the International Monetary ‘Fund’.”