Wealth tax would be a ‘dangerous road to go down’, BNP investment chief warns
The chief investment officer at BNP Paribas Wealth Management has become the latest senior banker to warn over plans to introduce a wealth tax in the UK, describing the move a “dangerous road to go down.”
In an interview with City PM, Edmund Shing said the move was likely to discourage entrepreneurs from starting a business in the UK, a move which could dampen the country’s long-term growth prospects.
“In most countries, the movement has been away from a wealth tax rather than towards a wealth tax…and it seems to me that it is seen more and more as a retrograde step to move back to a naked wealth tax, because it does unfortunately discourage entrepreneurs,” Shing said.
“I think that’s a very dangerous road to go down if you’re talking about long-term wealth generation and growth in the country because it’s not just growth of the economy, it’s a growth of jobs, you need to encourage entrepreneurs in order to encourage job creation.”
“Wealth taxes, like capital gains taxes and inheritance tax are disincentives to all of that, so I think it’s something one has to be very careful of.”
The remarks come amid growing concerns over an exodus of high net worth individuals in the UK following the removal of the tax-advantaged non-dom status, as well as growing fears over the introduction of a wealth tax.
The recent abolition of the non-dom regime could blow a £4bn hole in the public finances and lead to over 3,000 fewer jobs if a quarter of the country’s wealthy foreigners leave, according to a fresh study from the Centre for Economics and Business Research (CEBR).
Were half the country’s non-doms to leave – a worst-case scenario – the figure would be £7.8bn and cost 6,325 jobs. And if just 10 per cent depart – the Office for Budget Responsibility’s current most likely scenario – the Exchequer would miss out on £2.8bn; roughly the cost of the recent winter fuel allowance U-turn.
Since Chancellor Rachel Reeves confirmed she would plough ahead with the reforms, several ultra-high net worth foreigners have left the UK. Goldman Sachs executive Richard Gnodde and steel magnate Lakshmi Mittal have both quit as a result of the inheritance tax changes.
Shing said there had been widespread conversation among high net worth individuals about the tax burden in Britain, but cautioned that comparatively few had left the UK so far.
“There is always a lot of talk and a lot of thinking [but] it takes a lot to make people move,” Shing said.
“For those who are entrepreneurs there’s an extra element…not just personal taxation but the treatment of their businesses, particularly thinking about future capital gains or inheritance tax.
“It’s a complex question and not just around finance, it’s a personal choice as well. Wealthy families do not jump into it lightly.”
‘Cannot afford’ to scare capital away with wealth taxes
It comes after the boss of Royal Bank of Canada said that increasing the tax burden on the wealthy would “100 per cent” result in people leaving for “a lower tax jurisdiction”.
“If you put in place a 2 per cent asset tax, which is what’s being rumoured, that’s a lot. People would seek out other markets,” Dave McKay told the Financial Times.
“There are a number of clients who don’t want to leave — who are great contributors here to society — but they have to leave because of the tax burden.
“You cannot afford to scare capital away . . . [the UK] talks about trying to get rid of red tape, why would you shoot yourself in the foot and go through all that effort to cut red tape only to put an asset tax on?”