[UK] Windfall Taxes Supported By Majority Of The Public

21 MAY 2020

A recent opinion poll has revealed that the majority of the UK public - more than 50 per cent - would support a windfall tax on companies that have thrived during the coronavirus crisis, Business Matters reports.

The YouGov survey also demonstrated that 61 per cent would approve of a wealth tax for those with assets exceeding £750,000. The poll results came out as the Treasury explores ways to manage a deficit predicted to leap to over £300bn this financial year.

Chancellor Rishi Sunak has offered signs that he intends to borrow most of the money needed to fill the hole but, according to a Treasury document leaked last week, the government has also been considering options for public spending cuts or tax rises. 

Around 53 per cent of those polled were reportedly in support of an “excess profits tax” on industries that have thrived during the crisis. 13 per cent opposed the idea and 16 per cent were ambivalent.

The policy proved equally popular among Conservative voters. According to the poll commissioned by Neon - a leftwing campaign group - 54 per cent were in support.

Gabriel Zucman - associate professor at Berkeley - recently advocated for an excess profits tax, explaining that such measures were put in place during past “periods of crisis” like both World Wars and the Korean war.

“The idea is you have some corporation that disproportionately benefits from the crisis, either because their competitors are shut down or because they exploit the crisis by hiking prices,” Mr Zucman said.

Speaking to the FT, one former Tory cabinet minister said he expected most, but not all, of the pandemic funding to be paid for by borrowing but he predicted a windfall tax.

“I would expect a handful of tax rises when this is all over, including a windfall tax on the supermarkets and online retailers,” he said. “When you think about it there aren’t many areas that could sustain a rise in taxation but there will be a case for some of those retailers who have done well in recent months.”

The City has already braced itself for a potential excess profits tax. A matter raised during a recent earnings call with Ocado, the online retailer.

“I am not sure [talk of a windfall tax] is necessarily relevant when we are trying to serve more of the nation,” Duncan Tatton-Brown - Ocado’s chief financial officer - reportedly said during the call.

“We are a good citizen, so if the government decides it’s right to have a windfall tax then we’ll pay it...but I don’t believe we’re benefiting from a windfall.”

Supermarkets have thrived during the lockdown with the spike in sales in March akin to the Christmas shopping surge. The Office for National Statistics said in March food stores had the strongest growth on record in March. By contrast, non-food retailers have had a difficult few months and their shops look likely to remain closed until June at the earliest.

Supermarket chains have benefited from some of the rescue measures the Treasury has made available to all struggling companies, like a holiday on business rates.

In response food retailers argue that this record March might not translate into a profit boost over the entire year because they put money into hiring tens of thousands of new staff, expanding home delivery services and enforcing social distancing measures in stores.

Tesco, J Sainsbury and Wm Morrison have all said that such additional costs will cancel out any benefit they receive from paying no business rates on their stores in the year beginning April.

In April the UK government introduced a new digital services tax levied at 2 per cent of online revenues for major internet companies including Amazon, a company experiencing comparative success during the COVID-19 lockdown.

Yet Duncan Tatton-Brown made it clear that Ocado, in common with many other internet retailers, had not had the benefit of state support. “We’ve received no rates rebate, we haven’t delayed VAT payments, we haven’t taken any loans, we haven’t furloughed any staff.”

Robert Palmer - executive director of campaign group Tax Justice UK - said the survey revealed that the British public wanted an end to “business as usual”.

“It is clear that Brits want to see those who can afford it to shoulder a greater part of the burden to help pay for public services,” he said. “Those making super-profits during this time of crisis should be expected to contribute more.”