Problems in calculating or in attempting to tax wealth Flashcards
Wealth is difficult to define
Many different assets can be counted as wealth and there is often debate about what constitutes wealth, eg is it appropriate to regard non-marketable wealth that people have for personal use - such as clothes, cars, pensions and family homes, to be counted as wealth when it is continually being used.
There is also marketable wealth such as factories, farms, second homes, stocks and shares. This sort of wealth can generate even more wealth through reinvestment.
Moreover, the skills a person ‘sells’ in return for wages can be seen as ‘human wealth’. With so many assets being counted as wealth, a government will need establish a precise definition of wealth in order to tax wealth.
Wealth is difficult to measure
Wealthy people are often reluctant to disclose their wealth. They often refuse to take part in surveys and may conceal the true extent of their wealth by keeping assets abroad, putting wealth into the hands of third party companies or transferring wealth as a gift to a relative in order to hide how much wealth they actually own.
This makes it very difficult for governments to tax wealth.
Moreover, the country does not have a separate wealth tax, there are no public records of wealth held by the Inland Revenue. This means that measurements of wealth are often inaccurate, as they are often just based on estimates of the value of estates.
Moreover, the value of wealth constantly varies eg shares and property prices can increase or decrease so it is not always possible to give a precise measurement of wealth.
