As Germany eyes a wealth tax, London remains a haven for the super-rich

The Covid-19 crisis was an assault on our economies as well as on our health. Governments splurged unprecedented amounts of stimulus spending to save jobs and keep businesses afloat. 

Now that the Covid threat has hopefully receded, governments are looking aghast at the glaring holes in their countries’ balance sheets. How can they plug the gaps?

Sadly, they are yielding to a primal instinct to tax. In extreme instances, we have countries like Argentina launching a one-off raid on total assets, prompting yet more wealthy people to flee the country. 

In Britain, Boris Johnson’s social care plan has raised taxes on dividends and National Insurance. But those who fear a “big state” future in the UK can rest easy. 

As a Swiss adviser to high-net worth families with decades of helping the global rich protect their wealth, I’ve seen this movie before. Take it from one who knows: post-Brexit Britain stands to gain, not lose, from global jitters. 

Your country has form here. France had a longstanding wealth tax, only recently abolished. It led to more than 60,000 millionaires leaving between 2000 and 2016. Many of them settled in Kensington, David Cameron having famously rolled out the red carpet to welcome them. 

The wealth tax was disastrous for France. It generated two per cent of tax receipts, but cost twice as much from the attendant loss of income tax. Yet now it looks as though Germany may be about to repeat France’s mistake. 

Olaf Scholz’s Social Democrats recently floated a one per cent wealth tax – a tax ruled unconstitutional in 1995, and thought by many Germans to have been consigned to history. Not any more. At the recent federal election, the Social Democrats were voted in as Germany’s biggest party.

I predict that Germany’s millionaires will respond by setting up camp in some smart neighbourhood of London, a City made for the rich: law-abiding, with stucco-fronted villas, pleasant parks and good flight connections. (Even London’s weather shouldn’t put the Rhinelanders off.)

It has always been like this. Despite the growing chorus of voices – from the United Nations to the International Monetary Fund – on the need for fiscal “solidarity” after the pandemic, the truth is that my clients don’t lose sleep over wealth taxes. They don’t need to, because their wealth is, for the most part, highly mobile, as they are.

Even Geneva, my hometown and the birthplace of private banking, has a wealth tax. But there are ways around it. Those who aren’t in the job market can negotiate a lump-sum tax based on living expenses. My clients don’t even need to be domiciled here: some live in less punitive Swiss Cantons, a short train ride away. Some live slightly further afield, in one of Switzerland’s neighbouring countries. 

Quite a few live in London, and I expect to be visiting more of them there in the next few years. For all the recent hikes in National Insurance and corporate tax, Britain has no wealth tax, and a competitive capital gains tax, meaning the world’s super-rich will keep on coming. 

London’s dynamic job market can still draw in the Continent’s best and brightest – and right now, Germany’s wealthy are the ones beginning to gaze longingly across the English Channel.

So expect to see Bäckereien and Bierschenken springing up around Belgravia sometime soon. A pandemic and a global tax clampdown might just prove to be the Brexit dividend we least expected.

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