A competitive tax system in the financial sector is key to sustainable economic growth
The CityUK, a representative body of the financial industry in UK, sent last august a manifesto to the next prime minister including recommendations to boost economic growth and to regain the status as a world’s leading international finance centre. The paper contains recommendations to deliver a competitive tax system for the financial services, something that will be key to boost UK business investment needed to realize sustained economic growth.
The manifesto explores ways of collaboration between the government and the financial industry in different fields, to maximize the contribution of this sector to the economy and society. Regarding the tax system of the financial sector, one of the highlighted areas, the manifesto provides the following recommendations to the next prime minister:
- Finalize the review of taxation regime in financial services. The reviews of VAT treatment for financial services and the funds regime (especially the VAT treatment of fund management) should lead to more competitive tax regimes that incentivise investment funds, such as the innovative new UK Long-term Asset Fund, to be domiciled in the UK and stimulate fresh UK investment.
- Reform the bank levy in line with the UK’s withdrawal from the EU. The UK should at the very least follow suit to avoid a situation where banks are incentivised to invest in EU countries ahead of the UK.
- Strongly advocate for a better deal for UK-based financial and related professional services in discussions with OECD counterparts and when implementing OECD developments in the UK.
- Reform the tax system to create incentives that will accelerate financing the transition to net zero.
- Reform funding mechanisms on a “polluter pays” basis. At present, the Financial Services Compensation Scheme places a significant and rising cost of doing business in the UK financial services that does not exist in other jurisdictions.