02:21, July 20 710 0

2017-07-20 02:21:07
Clifford Chance blasts Labour proposals to extend Robin Hood Tax

Clifford Chance has criticised The Labour Party’s proposal to extend the UK stamp duty into a broader financial transaction tax (FTT).

The firm said Labour’s proposals were unclear and said that the proposal has “significant flaws in its design”, describing them as “utter rubbish”.

In the eight-page document, Clifford Chance took aim at Labour’s intentions to take the stamp duty, which ordinarily applies only to UK equities, and extend it into an FTT which would “apply to all debt and equity security trades where there is either a UK issuer, or a foreign issuer but one of the parties to the trade is a UK person. The FTT would also apply to derivatives where one of the parties is a UK person.”

Clifford Chance stressed that, instead of raising funds, it would work to the contrary. As the tax would only effect business done in the UK, the firm predicts that this would cause business to move away from Britain.

Clifford Chance tax partner Dan Neidle was highly critical of the proposals and said it would “magnify” the effects of Brexit.

Neidle said: “The idea that tax is an unallied good is a non-sequitur. There are big controversies around high-equity trading but you can’t just ban it. If you want to tax the financial sector, then tax the financial sector. Labour’s proposals are going to hit big investors and pension funds the hardest but this won’t hit the banks.”

The firm says Labour’s proposal has no intermediary exemption and that this would cause a “cascade” of multiple FTT changes. As a result, funds, institutional investors and, to a lesser extent, corporate issuers would bare the most severe brunt of this.

After the leak of Labour’s manifesto in May, the party said it would extend the Robin Hood Tax which stands at 0.5 per cent on share dealing to encompass more forms of trading. It claimed this could raise as much £4.7bn a year, increase market transparency, reduce systemic risk and discourage “excessive churning of the investments of ordinary savers by their asset managers”.

Clifford Chance rejects the FTT extension and is highly critical on the basis that it feels these objectives could all be better achieved through alternative methods.

These include extending tax on banks’ profits, increase income tax, further regulation of financial services to lessen systemic risk and a ban on high frequency trading as opposed to a higher tax.

The firm says that Labour’s plans are influenced heavily by a paper from professor Avinash Persaud published in January, which it said was “long on arguments in principle as to why an FTT is required, and short on implementational detail”.

Writing for The Lawyer, Clifford Chance partner Simon James had said that, in the light of the Great Repeal Bill, Labour could be set to take advantage of a “wounded government”.

The Labour Party did not offer comment.