Finance chiefs lobby Healey to protect City from fresh tax grab
City chiefs have warned against a tax grab on financial services and called on ministers to simplify Britain’s “byzantine” tax system, as fears mount that the Chancellor will use his maiden budget next month to launch another raid on the private sector.
The Square Mile’s top industry body, TheCityUK, which counts the UK’s biggest banks and money managers among its members, said tax reform should be a “strategic lever” to make the UK more competitive and called for the “ultimate removal” of stamp duty on shares.
Miles Celic, chief executive of the group, said financial services firms were already a “major contributor” to tax revenue and provide more corporation tax income than any other sector.
“In a world of cut throat competition for investment, Britain needs to remain competitive,” he added.
“This isn’t solely about the rates of tax. The UK is now shackled with the most complicated and Byzantine tax system in the OECD. This is a major cost to business and a drag on competitiveness.”
Healey’s ‘challenging’ moment
Healey is five weeks away from delivering a Budget that has already been described as “challenging” by top ministers, as a surge in borrowing costs threatens to wipe out the government’s fiscal headroom.
The letter to Healey warned the government against “sector-specific taxes” across the financial and professional services industries, which have been singled out by the government as among the highest potential drivers of growth for the economy.
The stamp duty on shares, a 0.5 per cent levy imposed on share transactions in a British company, made the UK an “international outlier” and weakened the London Stock Exchange and domestic investment, the group warned.
Rachel Reeves’ introduction of a three-year stamp duty holiday for newly-listed UK companies last year was designed to encourage more firms to list on the London Stock Exchange, but has so far failed to yield a meaningful uplift in IPOs. The Uzbek National Investment fund, UzNIF, has been the only sizeable float in the capital so far this year.
Scrap stamp duty on shares for biggest ‘bang for buck’
Research by Dan Neidle’s Tax Policy Associates suggested that the full abolition of the charge would have the largest growth effect compared to any other tax cut introduced by the government, given the likely boost to trading levels across UK capital markets.
But economists have warned Healey and Andy Burnham are facing a difficult set of decision with little “room for manoeuvre” on tax and spending.
KPMG’s chief UK economist Yael Selfin said the uncertainty of the Iran war and possibility of “new shocks” to the UK economy meant the government had “limited scope to provide significant support for growth or the cost of living”. The group said it expected taxes to rise in next month’s Budget.
TheCityUK’s also called on ministers to leave the Bank of England’s multi-billion pound interest payments on cash reserves to commercial lenders unchanged.
Figures including the clean energy investor Dale Vince, Reform UK’s Richard Tice and first secretary of state Louise Haigh have criticised the regime but central bankers have warned that overhauling the payments could undermine monetary policy controls.
A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”