The UK’s Trade Union Congress (TUC) has proposed that, when the time comes to deal with the public sector’s structural deficit, the financial sector should make a proper contribution through higher taxes.
The TUC says that, while it would be wrong to take measures to reduce the deficit until 2011 so as not to threaten economic recovery, the Chancellor of the Exchequer should then introduce a 0.05% transaction tax on instant sterling transfers between UK financial institutions.
The TUC is proposing a transaction tax on the money that goes through the UK’s Clearing House Automated Payments System (CHAPS). This system is used by large banks to make same day, irrevocable payments. Transactions – which reached GBP74 trillion (USD122.5 trillion) in 2008 – are dominated by the trading activity of large financial institutions.
A transaction tax of 0.05% would therefore have raised GBP37bn in 2008, it says, but would only impose a very modest charge on each individual transfer. A tax on the average CHAPS transfer of GBP2m would cost GBP1,000.
The TUC says that the main purpose of the tax would be to raise money to repair the public finances and therefore would not need to be permanent. But if it is found to have a useful dampening effect on speculation, it adds, it could be made permanent.
TUC General Secretary Brendan Barber said: “While attention has been focused on possible G20 plans for an international transfer tax to fund development and international action, there is a strong case for a domestic tax just for UK CHAPS transfers. We already have a range of such taxes in the form of stamp duty.”
“'A transaction tax won't be painless,” he continued. “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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