Corona Tax is on the cards to pay off UK’s debt - Jim Duffy

As scientists, politicians and media try to figure out how we come out of lockdown across the globe, many of us are left wondering about what life will be like in the next year.

It will take a 'big chunk of time to get back up to full speed,' says Duffy. Picture: Ian Rutherford.

Many businesses will sadly fail. That is a fact, simply because they will have run out of cash or borrowing facilities or customers. Some owners may decide to give up, as life running a business has become too hard. But, for the vast majority of businesses, they will soldier on – wounded. However, that wound is about to get deeper.

Quite rightly, the UK Chancellor worked fast to reassure citizens that their salaries would be partly covered and that the ­self-employed would get some recompense. Currently, the state is amassing a huge level of debt to keep the economy going. This is important, as when the ­Covid-19 curve remains flat and eventually starts to die out, vaccine-related or not, we need some form of working economy to be in situ.

That said, it will take a big chunk of time to get back up to full speed. Some analysts are predicting at least a year for everything that remains to be open and functioning optimally. The problem is that while that all sounds good on paper and in a financial model, by that time we will have a new tax in town – the Corona Tax.

I have no doubt that the Treasury is already working up ways of how the UK pays for its lockdown bill. Add to this the reduction in dividend cash that big ­companies will not be adding to the pot and the bill for Covid-19 gets bigger and bigger. Not in my lifetime, I do not think, have I ever felt that we are all in so much debt as a country and as a planet.

So, how do we pay for all of this – together? We must accept that it has to be paid for and we all have to shoulder the burden, no matter what country we live in. Spain, Italy and France will all be in the same boat with even bigger deficits and loans to pay back to the European Central Bank. There are a few options available to them all. But making that fair is the toughest part.

Currently, in the UK we have the usual taxes that we all shoulder. There is income tax, National Insurance, capital gains tax, inheritance tax and so on. These could all be candidates for a rise. VAT is always susceptible to being adjusted upwards when required.

But more will be needed to pay the Covid-19 bill and I’m thinking that a separate tax all of its own will emerge from this awful time. Perhaps one or two just to be sure. The primary candidate to become the vehicle that is ring-fenced to pay back the bill could be a sales tax. But, unlike VAT, where there are exemptions for this, that and the next thing, the sales tax or Corona Tax (CT) will be added to everything.

Omnipresent

No exceptions. It will appear on every shopping bill. It will be noted on every invoice for whatever you can imagine. From buying a car to car insurance to buying a bed to renting your Airbnb. But, the level and duration of this new CT will have to be set in stone.

The chancellor has to provide the overall estimate of what this horrible pandemic has cost the UK. Let’s say it is £1 trillion. He and his team then need to build a model on varying levels of taxation where the CT could be 2 per cent or 5 per cent of everything that is sold, traded or rented.

Finally, and most importantly, a date has to be set on when the CT will have paid the bill and stops. It has to terminate in, say, ten years or 15 years. It cannot linger on forever.

Only in this way can we all share even more pain in paying for being part of this global pandemic. It is unprecedented. Of course, there will be calls for higher taxation on millionaires and billionaires, many of whom have not covered themselves in glory.

Certainly that can be looked at and I am sure that capital gains tax on second homes or even the sale of homes over £1 million could be considered. But, for now, a simple and easily digestible tax such as CT will be in the planning stages at the Treasury. Be warned…

Jim Duffy MBE, Create Special.

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