Warning over potential tax changes which could affect pensioners

Shadow chancellor John McDonell is kicking off a review of the tax system in Britain, but an economist has warned of the dangers of cranking up corporation tax, and the effect it could have on savers, share holders, and pensioners.

Paul Johnson, the director of the Institute for Fiscal Studies, has warned that the effects of increased corporation tax, and of introducing a financial transaction tax (FTT), would be felt by people as well as the corporations.

While John McDonell is looking into the tax system, he will be considering the question of whether to introduce a FTT, a so called ‘Robin Hood Tax’, Johnson spoke to a Labour conference in Brighton, explaining that increases in FTT or in corporation tax would be immediately passed on by firms.

“There’s only three things that can happen,” he said. “They either reduce the profits that go to shareholders, so the shareholders pay the tax – the shareholders of course are largely people who are lucky enough to have pensions.

“Secondly, they can reduce the wages of their employees, or, thirdly, they can raise prices.

“Those are the only three possible outcomes of an increase in corporation tax or a FTT.”

However, Mr McDonnell has referred to research which indicates that up to £20 billion per year could be channelled to the Exchequer if tax loopholes were closed up and regulations tightened.

Supposedly, the relatively low level of the tax would “not have a material impact on pension funds, which by their nature turn over their portfolios slowly.

“The incidence will instead fall on more aggressive traders,” according to David Hillman, a spokesman for the campaign for introducing a FTT.

With the rise of new Labour leader, Jeremy Corbyn, the political world is already being shaken up a bit, but should the current Tory government fall at the next election, a lot of changes may get levelled at large corporations.