“Clegg disclosed that he had decided on the need for a tycoon tax after he read that Mitt Romney, who is on course to be the American Republican presidential candidate, had admitted he was paying just 13.9% tax on his multi-million dollar earning.”
Is the Deputy Prime Minister not aware that the UK and US have different tax systems?
Mitt Romney can pay a low headline tax rate because the US tax system a) treats dividend income very differently from wage income, b) has a low capital gains tax rate, and c) allows very substantial exemptions, e.g. for mortgage interest.
Who are these UK ‘tycoons’ that Clegg thinks pay less than 20% tax in the UK? None of the features of the US tax system that allow rich people there to pay low rates applies in the UK.
Indeed the only one that did apply – b) – no longer applies because Nick Clegg and his party succeeded in raising the capital gains tax rate from 18% to 28%. That dealt with the complaint of at least one UK private equity boss that he paid a lower tax rate than his cleaner by virtue of paying only 18% capital gains tax on his ‘carried interest’ earnings.
Why then is Nick Clegg apparently making UK tax policy on the basis of an article he read about what Mitt Romney pays in the US?
The only relevance of that article to the UK is that wealthy Americans can buy and sell property in the UK without paying UK capital gains tax.
Therefore, if the Deputy Prime Minister is genuinely keen to close tax loopholes that benefit the wealthy, then he should work with the Treasury, not just to end the stamp duty abuse, but to end the capital gains tax exemption on property for non-residents.
Why should foreigners be able to buy and re-sell investment properties in central London, and extract perhaps tens of millions profit, without paying capital gains tax, when UK residents are taxed on capital gains?