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Why the wealthy will be the scapegoats

With the media abuzz with calls for "fiscal stimulus" packages to pull the world out of what could yet become the worst slump in half a century, why worry about tax planning?

The theories of that great liberal economist John Maynard Keynes are back in fashion with the world's politicians while those of Adam Smith are being quietly consigned to the dustbin.

In practice that means a raft of public sector projects getting the green light on both sides of the Atlantic combined with potentially generous tax cuts in the hopes of persuading those lucky enough to still have jobs to go out there and spend.

It will also, inevitably, mean more borrowing. Much more borrowing. The trouble is that is precisely what got us into the current crisis in the first place and it applies to Governments as well as it applies to individuals and businesses.

However, when the former borrow at unsustainable levels the end result is not repossession or insolvency. It is rampant inflation, sky-high interest rates and another crisis following hot on the heels of the existing one that we all have to pay for. It is not as if it hasn't happened before.

But I think the current generation of politicians are aware of this. Which means that they are prepared to increase taxes sharply and quickly – around the globe – when we have seen out the current crisis.

Tax rises are never popular at the best of times, but tax rises after a financial horror show when Governments have been desperately trying to persuade people to spend to stop a nasty recession from turning into a catastrophic depression, could prove politically suicidal if handled badly.

Resolving this dilemma requires either a spoonful of sugar to help the medicine go down – which is just not going to be there – or a convenient scapegoat to clobber.

And that scapegoat will be the wealthy. Nicholas Sarkozy has already been talking darkly about the failure of capitalism. Barack Obama has indicated he will increase taxes for the wealthy as outrage at the huge packages paid to failed Wall Street executives grows, while cutting the burden on the middle class.

In Britain the fuss about the minimal tax paid by non-domiciled foreign residents has died down, but only for the moment. Expect an attack combined with an aggressive assault on "loopholes" and tax havens to emerge.

Will this do much to improve the state that governments are going to find themselves in post the current borrowing binge? Probably not, but it will make it easier to sell the painful medicine that will be required.

Families would be well advised to be prepared. Because whether it is two or five years down the line, tax is coming back.

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