Tax experts have been queuing up to warn that a blanket tax on wealth is both unlikely and unfeasible. But as ministers insist the government will avoid tax hikes targeting average earners, could it turn to an exit tax to plug the gap?

As reams of impressed tourists shuffled their way through the opulent surroundings of the Palace of Westminster’s Central Lobby, Richard Burgon stared down a camera to offer its viewers an enticing way for the UK to raise £24bn without blinking.

A blanket wealth tax on the super rich would, the arch socialist told Sky News’s Sophy Ridge, raise “at least” the amount of money needed by the Chancellor to fill her multibillion pound black hole at the upcoming autumn Budget. Citing research from academics at the University of Warwick and the London School of Economics, Burgon passionately defended his proposal to bear down on inequality in Britain, ignoring Ridge’s observations that no other country’s attempts at taxing net worth has generated significant amounts of money.

Within two weeks of the interview, the Institute of Fiscal Studies (IFS), Tax Policy Associates, and even the two dons Burgon cited to support his argument, warned that a wealth tax at this Budget would be, at best, impractical and, at worst, totally unfeasible.

And any lingering hopes harboured by left-wing parliamentarians for the intoxicatingly simple measure to be introduced this year were further punctured by a report in The Times on Monday, which said the Chancellor was poised to rebuff calls for the levy in her autumn statement.

But as the spectre of a levy on wealthy individuals’ net worth retreats from public discourse and the fiscal position remaining equally unenviable, attention has turned to other levers Rachel Reeves may pull in order to plug a black hole analysts estimate to be roughly £20bn.

Chief among them is a growing sense Treasury ministers will look to reform capital gains tax in a bid to raise precious revenue. More specifically, City economists and wealth advisers increasingly suspect that treatment of assets owned by residents who opt to emigrate abroad, known colloquially as an exit tax, is becoming politically enticing.

Currently, if a UK taxpayer opts to relocate abroad, any gains to their personal wealth during their time in the UK would be exempt from capital gains assuming the individual doesn’t offload their assets in the run-up to their departure.

Politically defensible

But a number of influential economic voices have used recent papers to argue that the carve-out is illogical, and acts as a perverse incentive for entrepreneurs and other asset owners, encouraging them to emigrate before they crystallise any gains.

In the past year alone, the IFS, the left-leaning Resolution Foundation and the Centre for the Analysis of Taxation (Centax) have endorsed an exit tax as part of a wider overhaul of the UK’s treatment of capital gains. Indeed, even those naturally opposed to the move can see its political appeal.

“It’s something that would be very tempting for the government to look at,” Marc Acheson, global wealth specialist at Utmost Wealth Solutions, told City AM. “I think if you were to poll people about whether they considered it to be fair that somebody could be resident in the UK for a number of years, generating gains, accruing wealth, and they could just leave and not pay tax on that until they crystallised it somewhere else, they would say it wasn’t.”

David Lesperance, founding partner of Lesperance and Associates, agreed that while an annual levy on wealth would likely result in a “net loss of tax revenue”, an exit tax would be simpler and more effective at generating tax receipts for the Treasury’s parlous coffers.

“It is politically defendable,” he said. “The government can say that the increase in asset value occurred while the departing taxpayer enjoyed all the benefits of being in the UK such as rule of law, [and the country’s] educated workforce.”

Fuelling the speculation has been the coded manner in which ministers have chosen to answer the many questions faced likelihood of a wealth tax during recent interviews. Government representatives doggedly reaffirmed their pre-election promise not to raise taxes on “working people”. Any punitive measures, they tended to add, would overwhelmingly fall on “those with the broadest shoulders“.