The Labour manifesto includes detailed costings, showing additional revenue raising measures totalling £82.9bn by 2023/24.
However, Labour subsequently said they would find a further £58bn to recompense women borne in the 1950s for changes to their pension age – an astonishingly generous, and apparently unfunded, additional spending pledge.
While in overall scope the total to be raised is comparable to the Liberal Democrats’ proposals to raise £63bn by 2024/25, the balance is very different.
Almost all of the Labour party’s yield comes from the wealthiest 5 per cent of taxpayers (those earning over £80,000) and from business, lowering the threshold for the 45 per cent rate and introducing a new 50 per cent rate for income above £125,000.
Labour would also abolish “non-dom” status altogether.
By contrast, the Liberal Democrats would raise £7.7bn by increasing income tax by 1p for everybody, and would also have a “Remain bonus” of £14.3bn from staying in the EU.
Corporate taxes would increase significantly, from their current level of 19 per cent to 21 per cent from April 2020, rising to 26 per cent by 2023.
A “small profits rate” would be retained at 19 per cent (rising to 21 per cent by 2023), applying to firms with profits below £300,000.
Other measures, such as the efficiency review of corporate tax reliefs (raising £4.3bn) and abolishing research and development credits for large businesses (£4bn), would also increase taxes on business, so that the total burden is much more than the headline rate increase
The method for taxing multinationals is to change to a formula-based apportionment (“unitary tax”) which is estimated to raise £6.3bn.
However, unitary tax has been discussed for many years, and while in principle it may be a better way of taxing the largest global businesses, in practice it will be fearsomely complex and is likely to require international agreement from the UK’s 100 plus Treaty partners.
The financial transactions tax (£8.8bn) will be deeply unpopular with the banking sector and will also impose significant compliance burdens on companies which manage their commercial risks using financial instruments.
For entrepreneurs, this will be a much harsher landscape.
Entrepreneur’s relief, which gives a 10 per cent rate of capital gains tax on up to £10m raised from selling a business, will be abolished.
Combined with the alignment of income tax and capital gains tax rates, this means that selling a business is likely to face a 50 per cent tax rate – a five-fold increase, which may mean that some decide not to set up a business at all – or to set it up outside the UK.
An owner of a relatively small business with profits of £400,000, paying corporation tax and then paying out all of the profits as a dividend, will see an increase in his or her tax bill from £199,000 to £252,000 (from the higher rate of corporation tax and the higher rate on dividends).