A windfall tax would only hurt our weakened economy

The calls for tax hikes is ramping up. Last December the Wealth Tax Commission recommended a ‘one-off’ 5 per cent levy on the assets of Britain’s wealthy to pay for the growing costs of Covid-19. In January Oxfam followed suit, using its yearly inequality report to call for big taxes on wealth and high incomes. Now, it’s the International Monetary Fund’s turn, recommending not only a temporary income tax hike for high earners, but also a windfall tax — that is, a tax on ‘excess profits’ — on businesses that faired well and profited during the pandemic.

The concept of wealth taxes on individuals is bad enough. Over the past few decades, the majority of European countries that implemented them have gone on to repeal them, as they found them an inefficient and ineffective way of raising revenue. For little gain, they come with a significant burden, including the erosion of a country’s own tax base and pressure to justify double-taxation.