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Are the wealthy preparing to jump superyacht?

Andrew Evans
01/10/2020
Apart from the human cost of covid-19, there has been and continues to be a huge economic cost unlike anything the world has seen since the Great Depression of the 1930s.

As Theresa May said, there is 'no magic money tree'. So while the State can prop up the economy for a while with a furlough scheme, green homes grant, stamp duty holiday and other forms of fiscal stimuli, eventually someone has to pay for all that extra public spending.
 
In all likelihood, it will fall on the shoulders of those most able to bear it, namely, the wealthier members of society including the super-rich.

For example, California may soon introduce the first wealth tax in the USA and New York is battling with a US$ 5 billion budget deficit that is bound to lead to tax rises. This is prompting some ultra-high net worth individuals to look for safe havens to preserve their fortunes. Some are uprooting to move to other states such as Utah or Texas to take advantage of a lower (state) tax regime while others are looking to Europe (and in particular, Switzerland) and other offshore tax havens such as the Bahamas. There has also been a flight from Manhattan to the suburbs such as Connecticut and the Hamptons.

In England, the furlough scheme is due to end in October and, if not extended, this is likely to result in a huge rise in unemployment (estimated at two million according to the FT) and additional economic strain on the economy. UK Chancellor of the Exchequer, Rishi Sunak is considering a range of new measures to raise at least £20 billion a year to cover the cost of the unprecedented public spending triggered by the pandemic. Mr Sunak has hinted that taxes could rise to pay back some of the £150 billion of government borrowing used to fund the emergency covid measures.

The Chancellor has his eyes on cutting pension tax relief, hiking capital gains tax, raising corporation tax from 19% to 24%, raising fuel duty, introducing an online sales tax and simplifying the inheritance tax system. While no mention has been made of a wealth tax, it has to be on the cards, especially if Sir Keir Starmer wins the next election.

We know that before the last election many family offices had given their private bankers instructions to transfer their assets offshore had Jeremy Corbyn won.

Ironically, the same family offices may now be considering transferring their capital offshore to avoid the threat to their wealth from a Conservative or Labour Chancellor seeking to recoup the huge cost of public spending on covid from the rich and super-rich.

In addition, it is unlikely that the super-rich will be settling in the UK for the time being.

With the Autumn Budget 2020 cancelled, it remains to be seen exactly what measures will be employed by the Chancellor to foot the covid-19 bill. Given some of the novel ideas Rishi Sunak has employed through the healthcare crisis, perhaps he has one or two more tricks up his sleeve that will not result in a mass exodus of wealth from these shores?
 

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