Andrew Tyrie, chair of the Treasury select committee, has written to the Chancellor for further information on the impact the proposed financial transaction tax would have on UK tax revenues.
The European Commission’s proposal, announced in September, would see a 0.1% charge on stock and bond trading and 0.01% on derivatives contracts. The tax would come into effect in 2014 and the EC predicts it would raise £50 billion a year.
In October, Tyrie wrote to Chancellor George Osborne asking what impact the tax would have on UK tax take. In a response, Osborne said over half of the FTT’s revenue – around £26 billion – will come from the UK, adding that as activity moves away from the EU in response to the tax, the revenue of other business taxes could fall.
Last week, Tyrie wrote back to Osborne asking for figures which take this “behavioural response” to the FTT into account. He also wants to know what estimates the Treasury has made on the effect of an EU-only FTT on the volume of financial services activity in the UK and on UK firms that trade within the euro area.
Tyrie says: “It is crucial to establish whether the FTT would – taking all taxes into account – raise any revenue and if so, how much. On the basis of the information in the public domain so far, it is far from clear it would be a revenue raiser. Too many claims and counter-claims are being made about the FTT without the necessary supporting evidence.”
Osborne’s response to Tyrie’s initial letter says: “Overall, there is a risk that any short-term revenue gains from the FTT will be eroded in the longer term through the wider economic impacts of the tax and reductions in revenue as activity shifts away from the EU in response to the tax.”
The Investment Management Association has warned the tax will end up hitting savers.
The FTT is currently at the centre of a battle between France and German who want to see it introduced solely in the EU to help deal with the sovereign debt crisis, while the UK has said it will only back the tax if it is introduced globally.