Press Room

29 Oct 2021

How would accountants change the tax system to pay for Covid-19 and recovery? – James Paull


Head of Incentives Group James Paull comments on how the tax system should be changed to pay for Covid-19 and recovery, in AAT Comment.

James’ comments were published in AAT Comment, 18 October 2021, and can be found here.

“There are potentially three main areas you could look at, including the big three (income tax, NI and VAT), making changes to existing smaller taxes or introducing a wealth tax, but each of these have disadvantages:

NI and income tax would raise a lot of revenue. But they are blunt tools that takes directly from the pockets of people who are struggling.

Making changes to smaller taxes, such as Capital Gains Tax or treating carried interest as income, would be quite an easy sell ideologically: it affects fairly well-off people. However, it would raise less revenue. Such taxes are generally easier to avoid – for example, CGT could be avoided by holding onto assets that might otherwise be sold – and they can distort behaviour.

Regarding a wealth tax, you wouldn’t need a huge tax rate to raise a very material sum of money. But a blanket wealth tax could be seen as double taxation as assets are bought out of taxed earnings. There are also problems with valuation and liquidity, as lots of wealth is tied up in homes and businesses.

I’d look at areas where tax relief has been given, such as pensions and ISA gains, and seek to claw some of this relief back as a one-off levy such as:

Pension levy

  • Easy to value as investments for pension funds are valued daily.
  • The scheme can pay so there will be no liquidity issues.
  • Previously been tax relief on pension contributions, so this may be fairer than alternative measures.
  • It would need to be a one-off levy rather than an annual fee.
  • But given market volatility this should have limited impact.
  • Consideration could be given to some additional tax relief when pension is drawn down.

ISA gains

  • These are tax-free and implementing a one-off tax on these would be relatively simple to administer.
  • This would be done at fund level so no administration for the taxpayer.

Other ideas:

  • Windfall tax on pandemic-related profits – Some people and companies such as online retailers, PPE manufacturers etc have done extremely well, so it would be a kind of levy on super profit generations.
  • Furlough – Similar to how the student loan mechanism works, you could potentially claw back furlough scheme costs by an additional tax charge to businesses once earnings are above a certain level.

Verdict: Look at areas where there has been tax relief and you can easily quantify the amount of tax payable.”


James Paull

James is Head of the Incentives group at Andersen in the United Kingdom. He provides advice in respect of the deign, implementation and operation of employee incentive arrangements to companies, partnerships and individuals with a particular focus on tax, legal and technical aspects.

Email: James Paull