That ‘jewelry tax’ proposal

Jewellery shot for RK Jewellers 01“Now they want to tax jewellery: New Lib Dem wealth plan to target ALL assets” screamed a headline in the Mail on Sunday yesterday, warning their readers of the latest appalling imposition that Lib Dems in government were about to put upon the public.

“Families will be forced to pay tax on jewellery and other heirlooms under controversial new plans drawn up by the Liberal Democrats. Under the scheme, tax inspectors would get unprecedented new powers to go into homes and value rings, necklaces, paintings, furniture and other family treasures.” they said. If you really want to, read the full article here.

Is this really true? Have Lib Dems really singled out jewellery to be the latest to bear the brunt of the recession?

Well, here is what the consultation paper that they took this from actually said, which was produced by the party’s tax policy working group of which I’m chair. I’ll let you judge for yourself, pausing only just to remind you that this is a consultation paper, deliberately intended to gain input and views from people in the party (and those beyond welcome too).

There has been some suggestion of using a net wealth tax to target the wealthy. For instance, the French operate such a system. Our mansion tax proposals target a similar (though not identical) group as property is a significant component of UK wealth. However net wealth tax covers a wider set of assets. It would require taxpayers to self-assess their net worth (which may be very difficult for illiquid assets) and would generally be quite complex to administer. And HMRC, in policing the system, may have to visit homes to test whether asset values of jewellery, paintings etc were correct.

Q20. Would you support a French style net asset tax?

It really is a shame that this seems to have got the headlines, as the consultation paper includes a whole load of ideas which we think will find quite a lot of favour with both Lib Dem members and the wider public. Of course you might disagree – but if so then we’d really like to hear from you: this is indeed rather the point of publishing a consultation paper! In fact, uniquely for Lib Dem working groups, this is the second consultation paper we’ve issued for exactly this reason. We’ve also hosted a webinar with Danny Alexander, supported local parties to hold ‘pizza and politics’ type discussions on our future tax policy, and will be holding sessions at most regional party conferences over the next few months.

So please tell us what you think. If you fancy a rather more sensible outside view of what’s in the paper, the Guardian have a really balanced (if not wholly positive) piece about it here.

For myself, I think we are developing proposals which will:

•Help the lowest-paid: we are proposing that once we have achieved our aim of increasing the income tax threshold to £10,000, it should continue to rise, to the level of full-time work on the minimum wage (currently around £12,100)

•Be simpler: by making the process for most people completing personal tax returns very much simpler; exploring allowing small companies to pay tax based on their own accounts, rather than have to prepare a separate tax return, by expensive experts

•Help small and new businesses to get going: through possibly rewarding small companies for the burden which administering aspects of the tax system places particularly on them; extending exemptions from paying employer National Insurance contributions for very small companies; building on the good work already done under the Coalition Government in continuing to make complying with HMRC requirements administratively simpler; and possibly helping new small businesses struggling with short-term cashflow issues

•Ensure the richest pay a fairer share: through introducing a ‘mansion tax’; possibly preventing some people effectively doubling their tax-free allowance, by merging the allowances for income tax and capital gains tax; looking again at situations such as ‘non-dom status’: and continuing to look at the tax relief for pensions for the wealthiest

•Ensure big businesses pay their fair share of tax: by strengthening further the General Anti-Abuse Rule which comes into effect this year with a more radical General Anti-Avoidance Rule which will institute a low cost system for companies proposing innovative ways to avoid tax to gain or not gain pre-clearance from the tax authorities, as already happens in other countries. This would also have the benefit of reducing the cost of administration for other companies by allowing the repeal of a large volume of highly specific anti-avoidance regulation

•Prevent problems which contributed to the 2008 financial crisis recurring again: by reducing the incentive to fund business growth through excessive debt by changing the generous tax treatment of interest payments; and restricting the ability of businesses to offset losses in previous years against profits in the current year to reduce their tax bill

•Be much greener: where we still have considerable further work to do as a group, and will be working in close conjunction with the party’s ‘Towards a Zero Carbon Britain’ working group

If you’d like to see more detail, the full paper is here

But all these ideas are just up for consultation at the moment. Please do let us know what you think: please do send your views and comments to Kevin Norton at HQ on [email protected]

* Jeremy Hargreaves is a vice chair of Federal Policy Committee and the Federal Board.

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  • If only there was some kind of body to which you could take newspapers to when they are deliberately misleading as part of a campaign against an individual or organisation and get a fair hearing are a prominent apology in that newspaper…

    I am never surprised that the Daily Mail and others will deliberately abuse the fact that the Lib Dems ask their membership about policy before finalising a policy document for the membership to vote upon in conference.

  • Douglas McLellan 19th Feb '13 - 9:13am

    Whilst it is clear that this paper was part of a consultation exercise surely you should only consult on ideas that are worthwhile and achievable?

  • Matthew Huntbach 19th Feb '13 - 11:18am

    This is a reminder of what we have to take on.

    People from outside who are constantly attacking us and accusing us of becoming indistinguishable from the Tories need to read this sort of thing very carefully. They seem to suppose policies that will reverse the divisions which have grown in wealth and life chances in this country under all governments since 1979 can very easily be introduced and will meet universal acclaim.

    The reality is that when you start thinking through seriously what they might involve, this is the sort of attack that will be thrown. The Daily Mail is a past master at this. Oh, they’ll join in the attacks on expenditure cuts, and wring their hands in a “why-oh-why” way, but the answer to their “why-oh-why” questions is usually “because right-wing propaganda outfits like YOU would moan like hell at the tax that would be necessary to pay for it”.

    It would be nice if some of those people on the left who have spent the past two-and-three-quarter years accusing us of abandoning our principles and becoming Tory yes-people were to give us a little bit of support when we talk about things like this, when we make suggestions like this which are very far from what the Tories would make. We need to be able to talk it through seriously, propose it to the people of this country, listen over those aspects of it they really wouldn’t accept, but remind them also that the alternative is more of what we have seen from the Tories: protection of the wealthy and their luxurious life styles at the expense of the imposition of misery on those less fortunate, argued on the line that laying a finger on the idle rich is somehow destroying the incentive to work hard (but taxing poor people on what they earn, or matching every little bit of increased earning with a cut in benefit is not).

    As for the Labour Party, well we know what they will do, what they always do. Join in with the Daily Mail in kicking us for daring to propose policies which might prove a bit uncomfortable for those who are currently very comfortable, and when they have finished with that, bring in a weakened version of those policies themselves and pretend they thought of them in the first place.

  • Cllr Colin Strong 19th Feb '13 - 12:06pm

    @Matthew Huntbach “pretend they thought of them in the first place”

    You will love this entry from Paddy Ashdown’s diaries:
    Friday 1st July 1994
    Peter Riddell has written a glowing piece in The Times about Tony Blair’s speech yesterday on economics, which largely borrows phrases and ideas I was using five or six years ago. Very galling that when Blair repeats them now he is hailed as a brilliant new thinker in British politics!

    Ed Miliband now wants to cut income tax (that the Lib Dems ARE doing in government) by funding it through a mansion tax (a Lib Dem idea). When will Labour have an original policy?

  • @Jeremy Hargreaves
    “So please tell us what you think. If you fancy a rather more sensible outside view of what’s in the paper, the Guardian have a really balanced (if not wholly positive) piece about it here.”
    It’s not enough to bat this one away with the “wacky” word as has Vince in the Guardian. Although one or two sites have reported the Business Secretary’s Sky News rebuttal, it was an inadequate response and open to misinterpretation.

    “It really is a shame that this seems to have got the headlines.”
    Jeremy, I appreciate this opportunity to point out how often I have heard this kind of benign reaction to a crude but potentially highly effective hatchet job as has appeared in the Daily Mail/Mail On Sunday. Demonstrably effective because, as I’m sure you will have noticed, so many of the unsurprisingly hostile 1200+ reactions seem to have been prompted by a caption, “Under the scheme, tax inspectors would get unprecedented powers to go into homes and value rings, necklaces, paintings, furniture and other family treasures,” strategically placed underneath a modest looking wooden casket filled with pearls and a few trinkets. The implication is clear: the Liberal Democrats are out to rob you (or even worse, your granny) of all your worldly possessions and will even break down the door of your home to gain access.
    Readers are then treated to a subtle form of anachronism whereby a “French style ‘jewellery’ tax” (presumably again referring to an idea from a Liberal Democrat Conference consultation paper on tax policy which may not even be debated) provides a caption to a year-old headline, “Taxman To Target All 1m Home Owners.”….no matter this refers to tax dodgers; many readers who skim the article (as most do) may begin to wonder whether they themselves will affected.
    It’s the thin end of the wedge argument, brilliantly exploited by a paper whose sole purpose in running now it is to disrupt this party’s Eastleigh by-election campaign. But if a political party is at risk of having any policy document it publishes on the internet plundered and traduced, an argument could be made that its ability even to incubate an idea let alone propose one for discussion will eventually be under threat.
    The need for soundbites and damage limitation, which has so devalued the very essence of political debate, is the fault of papers like this one who simply publish political news to an agenda. No wonder a ‘spin room’ room has to exist at HQ. More’s the pity.

  • Geoffrey Payne 19th Feb '13 - 1:18pm

    I haven’t seen the consultation paper yet. I hope it covers benefits as well as taxes. The issue of benefits should have been covered in the equality paper, but we were told at the time it would be covered in the taxation paper instead. I don’t see any mention of it here. It bothers me the the Lib Dems in government have supported cuts in benefits without any debate in the wider party, AND at the same time as making tax cuts for example by raising the tax thresholds. We want people on low incomes to better off, but why would anyone support this if it is at the expense of the those on the very lowest incomes?

  • Alex Sabine 19th Feb '13 - 1:32pm

    One service that the two Eds have unwittingly done with their half-imitating, half-differentiating 10p tax tokenism is to highlight the suspect arithmetic – or indeed cynical gesture politics – displayed by those talking of a ‘switch’ from income taxes to mansion taxes, as if the two were remotely comparable in their revenue effects.

    Labour’s proposed mansion tax, with a £2m threshold (the same as the latest Lib Dem variant last time I checked), is of course a very narrowly-based tax affecting something like 70,000 properties. It is surely pretty obvious that, whatever the merits or otherwise of this policy, it cannot finance significant broad-based income tax cuts for upwards of of 20 million people (whether a higher personal allowance or 10p starting rate) – even if those paying mansion tax are hit with pretty swingeing charges.

    There is some uncertainty as to what the mansion tax would raise. The Lib Dem manifesto suggested £1.7 billion, which would require an average charge of around £24,000 per property. Labour seem to think they can squeeze £2 billion from the same 1pc rate, but accept that this may be optimistic and hence that they might have to reduce the width of their new 10p tax band to even less than the pitiful £1,000 they are aiming for.

    By contrast, the revenue cost of the coaliton’s rises in the personal allowance above normal price-indexation is £9 billion per year and counting (this figure is for the rises announced thus far, ie up to and including the 2013 tax year; it will be higher if there are any more real-terms rises before the end of this Parliament).

    Even this figure has been minimised by reducing the 40p threshold (moving an extra 1.6 million people into the 40p tax bracket) and by phasing in the rises in the PA over the whole Parliament so that the £10k target will be reached in (say) 2014 rather than 2010 prices. (Clearly £10k in 2014 will be less in real terms than £10k in 2010. The cash rise in the PA under the coalition so far has been £2,965 but the real-terms rise has been £2,095, worth £419 per year or about £8 a week to basic rate taxpayers.)

    As the IFS tax expert Stuart Adam pointed out in a conversation I had with him last week, it is interesting to note that the 2010 rise in VAT raises a similar amount per year (indeed slightly more) than the cumulative rises in the PA are costing the Treasury.

    Unsurprisingly in this fiscal climate, if you want to have a broad-based income tax cut you’re going to fund it with a corresponding rise in one of the other broad-based taxes (VAT or National Insurance). The same problem would have confronted Labour had they been in power and had any desire to raise the PA, and the next government will face a similar strategic choice whether or not it introduces a mansion tax.

    Labour are implicitly admitting this constraint by talking about a narrow £1,000 band for their new 10p rate. This is not simply a mark of their lack of ambition on tax reform. It is a recognition that a mansion tax – by the very nature of its narrow base – can only play only a very minor role in any tax remission for those on low/middle incomes.

    It is not a panacea. Indeed, as the IFS argue, it is not even a coherent reform to our badly flawed system of property taxation. It would raise a small, though not trivial, amount of revenue. This revenue might just be enough to fund a 10p tax band on the first £1,000 of earned income, albeit at the cost of needless additional complexity in the tax system. It would be neater and more sensible simply to raise the PA by £500. But the point is that whichever you do, the cash gain to basic rate taxpayers will be the same £1.92 per week.

    What’s more, tax changes on this scale will be dwarfed by the tax rises the next government is likely to implement as part of the continuing effort to get the books into something near balance. Given the size of the deficit, additional revenue is needed not to fund bright new ideas but simply to cover existing commitments. That is the depressing reality of a £100 billion odd annual overspend.

    On this Labour are silent. Indeed they already appear to have ‘spent’ the proceeds of their mansion tax, not on the new 10p rate but on restoring tax credits, just as they have spent the revenue from the supposed bankers bonus tax several times over.

    Fiscal debate in the UK is still taking place in a fantasy land.

  • Eddie Sammon 19th Feb '13 - 1:50pm

    We got what we deserved and let that be a lesson for us.

  • @Geoffrey Payne
    Here it is.

    @Eddie Sammon
    Maybe the offending paragraphs on Net Wealth Tax (p.9) should have been removed because the communications team never seems to anticipate, or is not briefed as to, the consequence of such a paper being published.
    That is dangerous during a by-election.

  • Eddie Sammon 19th Feb '13 - 5:33pm

    Thanks Sean. There’s no real way of preventing these things getting out because investigative journalists go to extraordinary lengths to obtain inside information. The key is not to entertain such ideas in the first place, unless the party is willing to defend them. I thought Vince Cable did a pretty good job on Sky News squashing the rumours, mind you.

  • Why has this article taken so long? Vince’s squashing job brought some relief but it looked like we were backtracking on a genuine proposal. Whereas the reality is that the consultation paper was simply including a discussion of the net wealth tax idea for completeness.

    Also not helped by poor grammar in the following sentence: “And HMRC, in policing the system, MAY have to visit homes to test whether asset values of jewellery, paintings etc were correct”. Using “may” instead of “might” is increasingly frequent but unfortunately implied that we were treating it more seriously than we actually are, so giving our enemies a great quote.

    As for the overall paper, I am disappointed that:

    – “proportionate” seems to have been dropped since the previous consultation when we said we were aiming to be “progressive and proportionate” – we cannot be fair without being proportionate;

    – there is no mention of integrating tax and benefits so as to ensure that work pays;

    – we are still singing the virtues of the (50% of the rental yield above an arbitrary threshold) mansion tax rather than a proportionate property tax based on the existing council tax bands, although the discussion of taxing second homes etc suggests there is a recognition of its internal contradictions.

  • Jeremy Hargreaves 19th Feb '13 - 5:56pm

    Thanks for comments everyone, especially to those who have given views in response to the questions and issues raised in the consultation paper.

    I’m also glad that several people seem to agree that we need to not let our political opponents stop us discussing ideas with ourselves (not all of which we will finally accept or there is no point discussing them).

    On the ‘jewellery tax’, 2020 hindsight is a great thing! Like a lot of things in retrospect, what now seems obvious the Daily Mail might want to mis-represent, wasn’t at all obvious beforehand to the many people (including press people) who read it beforehand. Obviously we could have taken this question out, but there are plenty of other things in the paper which our opponents don’t like either which they could have picked on instead. It wasn’t at all clear they would go for this over some others and if we’d taken them all out then we wouldn’t actually be consulting our members very much.

    The asset tax is, as the paper says, something which has been suggested (and not only in Lib Dem circles), though it’s fair to say that it hasn’t had a massive amount of support.

    Geoff – our remit doesn’t cover benefits so this isn’t in the consultation paper and won’t be in our final paper. But I definitely agree that it is important we as a party (rather than as a tax group) talk about benefits too and I am trying to make this happen.

  • Michael Seymour 20th Feb '13 - 8:05am

    The idea that the Lib Dems are leading us towards a to totalitarian state (jewellery tax etc.) as well as trying to tax people on their property, has made me realise the party is no longer for me. I have been a liberal all my life, but now I doubt the veracity of the party. I live in an area (Notting Hill) which when I first moved in people paid good money not to live here, it was largely a crime area. With difficulty I bought myself some where to live. Now it is owned largely by the rich and super- rich I may be expecting soon to pay even more exorbitant taxes. My yearly pension is less than 12,000 a year after tax. I am sure there are other people like me, who bought their property many years ago, in the same position. Its no good saying we we should move, this is the area we like and have lived in, why should we be forced to move by mindless politicians, who are encouraging the super-wealthy to move in. Goodbye Lib Dems.

  • Kevin White 20th Feb '13 - 8:17am

    Scrap the Bedroom Tax

  • David Wilkinson 20th Feb '13 - 9:48am

    What a stupid idea to even think of a jewelry tax, oh the French do it and that makes it sensible.
    I surprised that the windox tax and the hearth tax have not been resurrected as a policy idea, although central heating as probaly finished the hearth tax comeback.

  • Two comments –

    1. It is highly dangerous for the policy making machinery of a party currently in government to act like an opposition think tank, flinging out for consultation ideas that are bound to cause concern and have no chance whatsoever of implementation whoever is in power.

    2. It is sad to see the Guardian still seeking to punish the Lib Dems day after day for having the effrontery to go into this coalition – in this case by using a photo of Ed Milliband and his joke candidate to illustrate a story about a neck and neck contest between the Lib Dems and the Tories and then accompanying it by this wrecking story about a vague policy idea largely rubbished even in the consultation paper in which it is mentioned.

  • Matthew Huntbach 20th Feb '13 - 3:02pm

    Jeremy Hargreaves

    On the ‘jewellery tax’, 2020 hindsight is a great thing! Like a lot of things in retrospect, what now seems obvious the Daily Mail might want to mis-represent, wasn’t at all obvious beforehand to the many people (including press people) who read it beforehand.

    I’ve always been a great believer in shifting taxation from income to land and wealth, but I learnt the hard way many years ago that while theory and logic may argue the case for it, emotion argues the other way. So, no, it’s not 20/20- hindsight. We need to be aware that this is the sort of thing that will be said, and we need to have our lines ready to counter it. That is why I made the point about support from the left. Policies like this will never get through so long as the left is divided so that when one part of the left proposes them the other part opportunistically joins the right in attacking them.

    That is why I believe anyone who is a serious campaigner on the political left should make a point of reading the Daily Mail and THE Sun. It isn’t pleasant, but it reminds you what we are up against. Too many people sit back and think left policies are so obviously good that all that needs to be done is to propose them and support for them will come flocking. I wish it was like that. Read the Daily Mail and THE Sun to see why it isn’t – this is the stuff most of the population reads, so any serious campaigner needs to think “How will what I say be misrepresented in those … ?”.

  • Jeremy Hargreaves thank you so much – this is the one I’ve been tackled with most on the doorstep. Your line “Of course you might disagree – but if so then we’d really like to hear from you: this is indeed rather the point of publishing a consultation paper!” is what I’ll be taking with me in my toolbag of tricks tomorrow! A very helpful reminder indeed.

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