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Labour’s plans to raise taxes on businesses and financial transactions will hit pension funds, reducing returns for savers and harming living standards into old age, the Institute for Fiscal Studies has warned.
Jeremy Corbyn hopes to raise £5.6bn per year with a levy on bond and derivatives purchases, extending the stamp duty charge that already affects share transactions.
He said it would target banks and help repay the damage wrought by the financial crisis.
Tax revenue as a percentage of GDP
“You shouldn’t think that just because this is a tax on the financial sector it is just a tax on rich bankers,” said IFS associate director Rob Joyce.
“One group who are effectively likely to be paying much of the tax arepeople with private pensions. Essentially this is adding a charge to the trading of these financial products so it reduces the returns to any savings that are invested in that form, and of course pension funds trade in these things all the time.”
He added that it was “unclear whether it will increase or decrease market volatility”, despite Labour’s hope that less trading will mean less volatility.
The proposal to remove the exemption currently enjoyed by intermediaries means that transactions via a stockbroker will be taxed twice, rather than once if the share is sold directly – a measure deemed “ill-judged” by the IFS.
Labour’s proposed corporation tax rises would have a similar effect.
“When businesses pay tax, they are handing over money that would otherwise have ended up with people, and not only rich ones,” said Carl Emmerson, the IFS’s deputy director.
“Millions with pension funds are effectively shareholders. In the longer term, much of the cost is likely to be passed to workers through lower wages or consumers through higher prices.”
Labour acknowledged there was some uncertainty in the amount their taxes could raise.
“We believe the IFS has underestimated the revenue raising effectiveness of some of the tax changes we would make, but we recognise the potential for uncertainty, which is why we have allowed headroom in our plans,” said shadow chancellor John McDonnell.
“The only numbers we saw in the Tory manifesto were the page numbers. But what has become clear today is the choice at this election – continued austerity and falling living standards under the Tories, or higher wages and increased investment in our public services and infrastructure under Labour.”
[“Source-ndtv”]
