May 09 2007
One cheer for Gordon Brown
It is good that Gordon Brown and Ed Balls recognise the huge importance of the financial sector to the past and future growth and prosperity of the UK economy, and good they are now keeping in regular touch with financial businesses to see what government can do to keep those businesses here.
I was at a breakfast in the House where the fund management industry put its case for certain tax changes which might help stem the flow of investment management activity to Dublin and Luxembourg to Ed Balls. Today we hear that the Chancellor will meet the High Level City group again and will tell them that those changes can be made. Well done the government.
However, both Ed Balls and the Chancellor need to understand just how footloose business now is, and how determined Ireland, Holland, Luxembourg, the flat tax countries of Eastern Europe and other places further away are to wrestle our business to their shores by lower taxes. The UK still imposes a Srtamp Duty on share purchases whilst all serious markets around the world have long since dropped such impositions.
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I hope the High Level Group will put the case strongly for lower taxes. It is the most vital thing. I hope they will also put the case for less intrusive and expensive regulation. Our clumsy implementation of the Money Laundering provisions from the EU is a prime example of a self inflicted wound which does not do anything to make it more likely the government will catch the big operators from the the international crime rings the measure was designed to tackle. Putting off the small saver will not stop the global drugs trade.
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
While I agree generally with the principle of a favourable tax-climate for investment, it needs to be done very carefully. We are experiencing a debt-laden approach to large buy-outs by private-equity fund managers which in turn forces much short-term thinking to help right-size the balance sheet in order to realise any gains. High-debt levels in any business weaken your control over your own destiny. This lop-sided incentive creates myopic thinking that obscures visionary strategies for long-term and sustainable growth.
Also, your example of the stamp-duty on share purchases cuts both ways. While I agree that it may be an unfair tax on corporate transactions, it is significantly lower than stamp-duty on property transactions and offers a convenient tax-avoidance mehanism for commercial property transactions by transacting the sale as a company rather than a property asset.
While your sentiment is unquestionably correct, the devil is in the detail as ever with tax.
Tom
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I would hope that the scrapping of Stamp Duty on shares would be one of the first acts of a Cameron government. I don’t expect Gordon Brown to give up so much easy tax money any time soon.
Why is that the Labour government is so eager to encourage damaging activities like gambling by axing gambling tax and bringing in super-casinos, and at the same time will not remove a tax that could encourage millions more people to place their money into shares. It’s better for ordinary people and it’s better for British business.
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