It’s no longer oligarchs, footballers and shady business people under tax scrutiny in Britain. This weekend it emerged that the authorities will target anyone with homes and assets worth more than £1 million ($1.6 million).
Since 2009, Her Majesty’s Revenue & Customs has been looking into the 5,000 richest people in the UK—those worth more than £20 million—to make sure they paid their fair share. Officials said the High Net Worth Unit was partly about customer service, i.e., helping really rich people with their taxes, and indeed each high-net-worth individual (rich person) got a personal customer relationship manager (taxman). Of course, if discrepancies were spotted, the unit investigated.
In September 2011, officials created the Affluent Unit to check out some 200,000 people worth between £2.5 million and £20 million, and the mission became more explicit. Get the tax dodgers. Those with off-shore property, for example, were especially scrutinized.
Now the threshold is £1 million. The expanded range includes roughly a half million people, and 100 new staff will join a team of 200 to look for red flags and anomalies.
The latest move is as much about cash as it is about politics. Britain’s budget deficit is at a record high, and isn’t likely to decline until 2017. With the UK in a double-dip recession, benefit payments are up while corporate taxes are down. Analysts predict the government will have to borrow billions more than originally anticipated. Bets are off that Britain’s Treasury chief, George Osborne, will keep his promise to cut the country’s debt as a percentage of GDP by 2015. Enter politics.
Government coalition partners, the Liberal Democrats, jumped in this weekend with pledges to crack down on dirty tax cheats. Leaders clarified that expanding the net is aimed at making sure rich people pay their fair share. Danny Alexander, chief secretary to the Treasury, said this weekend: “The wealthiest did best in the boom years and it is right they should pay more now.”
Halfway through the government’s term, Liberal Democrat leader and Deputy Prime Minister Nick Clegg appears to be courting the the 85% of potential voters (pdf; see page 4) worth less than £1 million. Now he’s talking about taxing the rich. He says he won’t agree to more austerity cuts until his coalition government colleagues agree to a wealth tax.
Whatever the reason for widening the net, this more aggressive system of tracking down tax dodgers is showing results. In September, government officials announced that the High Net Worth Unit had recovered £500 million in unpaid taxes for the past three years.