Labour urged to come clean on exit tax
Labour ministers have been urged to clarify whether the government will introduce an exit tax as Tax Policy Associates chief Dan Neidle warned rumours could be “damaging” for the UK economy.
Chancellor Rachel Reeves looks poised to raise more than £20bn in taxes later this year amid a shortfall in the fiscal headroom left by U-turns on welfare savings, higher borrowing costs and a likely downgrade to the UK’s growth forecast.
But exit taxes, including reforms of capital gains taxes to stop UK taxpayers from taking gains abroad to get an exemption, are widely feared by City firms and global wealth specialists.
Neidle, the former Clifford Chance lawyer who has become a leading voice in tax policy debates, had sounded the alarm bell on speculation around exit taxes.
In a post on X, he said: “Exit taxes are dangerous things, because mere rumours of an exit tax can be damaging.”
“If the Government was going to introduce an exit tax it should have done so immediately, outside the Budget cycle.”
“If it’s not, it would be a good idea to publicly rule it out.”
The government has so far refused to rule out individual taxes, claiming it would drive speculation of other tax hikes ahead of this year’s Autumn Budget.
Labour has few options on which taxes it could increase, having vowed not to raise income tax, VAT or employees’ national insurance.
Corporation tax, which also yields the government large portions of its revenue, has also been capped at a 25 per cent main rate.
It leaves the government looking at hikes to tax on pensions, property and businesses in its next Autumn Budget.
Labour warned on wealthy investors leaving
Introducing a form of an exit tax has been endorsed by top think tanks including the Institute for Fiscal Studies (IFS) and the Resolution Foundation in the past.
London School of Economics professors at the new Centre for the Analysis of Taxation called on the government to introduce an exit tax for “more efficient” and “fairer” standards like Canada and Australia, which are often cited as economic models for Labour.
Global wealth specialist March Acheson has suggested that it could be “very tempting” for the government to introduce the tax given public opinions on fairness.
But top business groups feel it could undermine Labour’s efforts to attract investors as firms would be dissuaded from setting up shop in the UK.
Neidle’s tweet was in response to a comment from Michael Ashcroft, the leading businessman who served as the former deputy chairman of the Conservative Party.
Ashcroft suggested “wealthy UK residents” were leaving the UK ahead of this year’s Budget “in case the government attempts an exit tax on unrealised capital gains”.
Recent surveys have suggested that the UK lost more billionaires than any other country while entrepreneurs considered making an exit.