Taxing banks is a fairer way to balance the UK’s books than a VAT rise that would hit low and middle-income Britain hardest, according to a report by the Institute for Public Policy Research (IPPR) for the Robin Hood Tax Campaign.
The report, published today (10 June 2010), found that with profits and bonuses once again rising sharply, banks, hedge funds and other financial service providers can potentially afford to pay an additional £20 billion-a-year in taxes. By 2011, profits and bonuses in the UK financial services sector are estimated to reach £90 billion.
Meanwhile, an increase in VAT – predicted by experts to be included in the Budget later this month - would hit ordinary people least responsible for the crisis hardest. The poorest fifth of Britons pay twice as much of their disposable income in VAT (12.1 per cent) compared to the richest (5.9 per cent), according to the report.
Poorer areas of the country – parts of northern England and Scotland for example, will be harder hit by a VAT rise than more affluent areas.
Tony Dolphin, ippr chief economist and author of the report, said: “An increase in VAT would hit ordinary people hardest, particularly those on low incomes. Overall, the North and Scotland will be hit harder than the South.
“By contrast Robin Hood Taxes on the financial sector would be paid disproportionately by the wealthiest in society.”
The Robin Hood Campaign is made up of 110 organisations, including the thinktank Ekklesia, that are campaigning for financial sector taxes to raise billions to protect public services, tackle poverty at home and abroad and fight climate change.
Max Lawson, Robin Hood Campaign spokesperson, said: “This report explodes the myth that banks cannot afford to pay a Robin Hood Tax or that somehow they would pass it on to ordinary people."
He added: “There can be no justification for increasing VAT that will hit the poor hardest when there is a fair and feasible alternative favoured by a majority of the UK public.”
Ekklesia is a sponsor of the Robin Hood Tax Campaign.