19 May 2022

Opinion from Adrian Leopard & Co

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Windfall tax – is this the right time?
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Windfall tax – is this the right time?

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Is it unreasonable for exceptional profits made as a result of the misfortunes of others to be subject to an additional tax?

The economy has had some really bad hits during the pandemic; many businesses have gone bust and large numbers of people have lost their jobs. The future looks uncertain because we do not know when things will be able to get back to some semblance of normal working. The hospitality industry, for example, may never be the same again and it will certainly take time to restore people’s confidence to going back out and mingling.

Some businesses have learned and been able to adapt. In the hospitality industry, many catering outlets have now turned to take away service, so much so that this is very likely to become a much bigger feature of future commercial entertaining. The quality of take away food has in many cases increased greatly and if that level of quality can be maintained then it will be a much more popular mode of eating in many quarters.

Government has actually done amazingly to try and help keep the economy alive; yes there are complaints that it has not worked for everyone but in any system there will be those who fall through the cracks. More help is certainly required to keep businesses alive so they can pull themselves back together when the crisis starts to pass.

However, what is also quite clear is that every cloud has a silver lining and some businesses have done very nicely indeed out of the pandemic. Online trading has never been better; because shops have been closed it has been a natural move to go to online suppliers. Banks have done well; certain retail outlets like supermarkets have done well and there are many more.

So is it a surprise that once again the question of a windfall tax is raised? Is it justifiable and how would it be assessed?

Last time there was a Windfall Tax in the UK, it was introduced in 1997 by the then Labour government and its purpose was to syphon off excess profits from privatised utilities. It raised £5 billion. Today there are other protections to ensure that profits from these companies are capped. But the notion of a windfall tax for those benefitting particularly from the pandemic is quite a different proposition. Those companies which have done well have done so completely by accident as opposed to deliberate policy as was the case back in 1997. But done well they have and with the extraordinary cost to the exchequer of trying to keep the country’s head above water, funding will need to come from somewhere.

As Margaret Thatcher pointed out, governments have nothing – their income comes only from operating the economy and at the end of the day it is the people who will have to pay. The only real question is “which people?” – the ones who have already gone bust or the ones who have done nicely thank you?

Keep your eyes open – it could be that this debate is only just starting.

Adrian  Leopard 21-02-21

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