Taxing the Super-Rich

The share of all income and wealth going to the UK's richest individuals has risen substantially over the past two decades, despite more muted increases in overall inequality. Initial signs are that Covid-19 has exacerbated this 'pulling away'. Meanwhile, improved access to tax data has begun to shed new light on the taxes paid - and not paid - by top earners and the wealthy. There is emerging evidence that many at the very top pay proportionally less in tax than those lower down, due to legal tax planning not available to the majority of taxpayers. Several international studies find that tax evasion by the global rich is also higher than previously thought. These factors, together with the strain on public finances from Covid-19, have intensified public pressure to increase the revenues collected from the 'super-rich'.

However, a major barrier to re-designing existing taxes is the severe lack of evidence on this prominent yet enigmatic group. In the UK, very little is known about the characteristics of those within the top 0.1% - roughly those above £500,000 in income or £5 million in wealth - let alone how they respond to the tax system or their wider impacts on the economy. Public opinion and government policy remains almost exclusively reliant on small-scale surveys and individual anecdotes. The lack of robust quantitative evidence makes it impossible for policymakers to reliably model the revenue, distributional and other economic impacts of reforms; this uncertainty is a powerful force of inertia limiting change despite the widespread perception that the existing system is not working.

This project will create new evidence on the characteristics, behaviours and economic impacts of the UK's super-rich, and recommend reforms to taxes on this group. Whereas previous studies have looked at a much broader cohort of high earners, we will focus on those in the top 0.1% by either income or wealth. Our analysis will leverage unique access to linked administrative data from multiple sources, building on our track record of analysing tax data using HMRC's secure 'Datalab' research facility. Our interdisciplinary team includes lawyers and sociologists as well as economists, helping us to interpret the complex behaviours of the super-rich and ensuring that we design policies that attend to the legal and administrative challenges of implementation.

Our work will address five key areas:
1) Measurement: How much income and wealth do the UK's super-rich have, what is its composition, and how have these shares changed over time?
2) Characteristics: What are the key socio-economic characteristics of the super-rich, what are their economic trajectories and to what extent are these individuals interconnected via corporate ties?
3) Tax planning: How responsive are the tax planning strategies of the super-rich to changes in tax policy and what is the extent of non-compliance?
4) Economic impacts: How are the investment and location decisions of the super-rich affected by tax policy and what is their impact on the wider economy?
5) Policy: How do the UK's policies for taxing the super-rich compare with other countries and how should these policies be reformed?

To answer these questions, we will use de-identified data from the personal tax records of every individual within the top 0.1% spanning the past two decades. We will link these records at both individual and household levels, together with data on the companies that they work for, manage, or own as major shareholders. We will also link data on land ownership, immigration status and (for a sample) survey data on wealth. As well as the direct contribution to knowledge from our findings, this ambitious new data infrastructure will help to build capacity for subsequent research. We will provide policy recommendations that are transparent about their aims, based on the best available evidence, and communicated accessibly and compellingly to policymakers and the public.