The Institute for Fiscal Studies (IFS) has said that the Labour Party will probably raise less than the £8.8bn it predicts by extending the UK Financial Transaction Tax (FTT). The reasons it cites are the same general criticism of FTTs posed by lobbyists.
Labour cites my work in their tax design, a design that reduces the specific risks the IFS cites and makes conservative assumptions on impact and collection. It is fake news that FTTs are hard to do and raise little. Labour’s proposal borrows from the best examples of the 40 countries that already raise £30bn per year from FTTs. They exist in the biggest financial centres like those in the US, Switzerland and Hong Kong, and in the fastest growing markets like India, China and Singapore.
The best FTTs, unlike a 1980s Swedish brokerage tax, are not based on where a transaction takes place. Currently, anyone who switches from trading a UK share in London to Hong Kong, still pays the 0.5% stamp duty on share purchases because their transaction will be legally unenforceable if they do not. No investor wants to save 0.5% of an investment to risk losing the other 99.5% of it. The UK stamp duty on shares has one of the lowest levels of evasion.
