Tax the windfall?

A windfall tax might raise money without making anyone go broke

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UK economy after coronavirus: Rishi Sunak must choose between tax hikes and spending cuts — or just ignoring the growing national debt

The coming rise in the national debt is likely to force hard choices on Rishi Sunak and the rest of the Government.

The Chancellor's first Budget in March was dominated by big spending pledges, making good on the Conservative manifesto commitments to end a decade of austerity.

But faced with a post-coronavirus deficit and massively increased stock of debt, Mr Sunak will have to tackle the same problems as George Osborne did - even if he chooses a different way of going about it.

Mr Sunak's Treasury legacy, and his chances of one day succeeding Boris Johson in 10 Downing Street, will depend on the path he takes and how well he succeeds.

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Would a windfall tax be an option for the government?

By Joe Harker

The coronavirus pandemic has put normal life on hold and cost most parts of the economy billions in lost revenue.

The government has had to introduce support schemes for employers and employees in order to avoid large swathes of the UK running out of money.

Before the pandemic millions were mere weeks or months away from financial collapse, without the furlough scheme or support loans they would likely have gone bankrupt.

The Claim:

These schemes don't cost nothing and the government has racked up a budget deficit of billions paying to keep the economy from collapsing.

It's the right thing to do, naturally, as coming out of lockdown with a destitute populace and the mass unemployment that would have been caused by collapsing businesses would be the disaster scenario.

At the most basic level for the economy to work people need to be able to afford things, but the government will also want to get their money back and close the deficit quickly.

It is here that the idea of a windfall tax is mooted, essentially levying higher costs against those few businesses which are making more money during the pandemic.

Those shops which are still open are getting all the customers and if they're making more money at a time when everyone else is struggling then a tax could be introduced.

The Counter Claim:

However, chancellor of the exchequer Rishi Sunak is part of a government which promised in their election manifesto not to raise taxes in the near future and does not want to return to a "tax and cut" strategy that would essentially be a reintroduction of austerity.

A number of businesses which would likely be targeted by a windfall tax have hit back at the notion that they are making fat piles of cash from the pandemic.

Online retailer and delivery service Ocado have said they would pay a tax if the government introduced it against them but they disagreed with the idea they were having a windfall.

They also questioned why people were talking about them being taxed when they were providing essential goods during a time of crisis.

Supermarkets have seen a huge boost in sales during the pandemic and they have argued that larger revenues don't automatically mean more profits. They have insisted that hiring more staff to handle stock and deliveries means they aren't having the windfall many would expect.

The Facts:

A majority of the public would support a windfall tax, with support also existing for a separate wealth tax to pay for the debts incurred by coronavirus.

There will be massive bills to pay once the lockdown ends and the dust settles after the pandemic.

Making those most able to shoulder the burden do so is right, but the government must be careful not to punish businesses for making money if they are also having to spend much more of it too.

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