More Calls for UK Transaction Tax

November 13, 2009 Taxation in UK  No comments

The UK’s Trades Unions Congress (TUC) has called for the country to create a financial transaction tax.

According to statements released by TUC on November 11th the UK needs to begin taxing financial institutions in order to aid in repairing the damage done to the economy. TUC claims that this could be done with a 0.05% levy on some inter-institution financial transactions.

The TUC proposal would see a levy on transactions through the Clearing House Automated Payments System (CHAPS), a system used primarily by banks for making same day, irrevocable payments. The idea extends to equally levying any new system that arises and shares functional properties with CHAPS. According to TUC estimates, such a levy could have raised £37 billion in 2008. Though changing usage patterns by financial institutions would most likely lower this to an annual £30 billion.

The proposed system is different to previously suggested “Tobin Tax” systems. Unlike any Tobin Tax system, the TUC proposal would be restricted the UK only, and not require the corporation of other nations, greatly reducing complexities with its creation. The original Tobin Tax was levied on cross-border currency transactions and aimed at reducing currency speculation. Conversely, the TUC proposal is levied within the UK borders and is aimed at shifting the burden of economic recovery form personal tax payers to the financial sector.

Brendan Barber, TUC General Secretary, emphasized that the tax is to aid the UKs economic recovery and therefore does not need to be permanent. He continued to say “A transaction tax won’t be painless. But no deficit reduction plans are. Putting up VAT would hit consumers, particularly the poor, and encourage evasion. Raising income tax would hit ordinary taxpayers hard and cutting public services would also increase unemployment and bankruptcies”.

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