What the hell is Miliboy up to here?

Central to that plan – in addition to a mansion tax on homes worth more than £2m and a levy on the profits made by tobacco companies – is a move to raise an estimated £600m from ending a relief which allows hedge funds to avoid paying tax on shares by getting investment banks to buy them on their behalf.

But intermediary tax relief, which he appears to be targeting, benefits not just hedge funds but pension funds and endowments as well as large companies.

Can someone explain this to me? A quick look around tells me that this relief applies to intermediaries. I.e, people buying shares on behalf of someone else.

OK.

But what’s the detail of it? My assumption is, and this is what might be wrong, that if I buy some shares through my bank (say) then the transaction as a whole pays stamp duty just the once. The bank doesn’t pay on their purchase, then I pay on my purchase from the bank. The bank being the intermediary here they get relief, but I as the end buyer don’t.

Have I got that right?

13 comments on “What the hell is Miliboy up to here?

  1. Banks can use the intermediary relief when their trading desk buys on own-account, ie they are not actually an intermediary. This is not controversial. What is controversial is the bank then passing the economics of the shares to a hedge fund via a derivative. A larger scale version of the well known CFD market

  2. Miliband’s policies don’t have to make sense.
    The three tobacco companies paid £39m corporation tax between them on their 2013 profits meaning their UK taxable profits were £170m – Labour wants an extra £150m a year i.e. £189m tax on £170m profits.

  3. Yes he’s talking about CFD’s essentially?
    Never mind that stamp duty raises UK cost of capital.
    Who cares about that?!

  4. I am glad that someone’s finally proposed taxing tobacco. It’s frankly ridiculous that that’s been missed all these years. Especially since I hear it’s quite bad for you. Perhaps increasing its cost will even encourage people to give up.

  5. ST,

    Its not a tobacco tax but a levy on tobacco companies’ profits. That way he won’t be attacking the smoking working man, only the evil tobacco companies. And if the tobacco companies do raise the price of cigarettes then double bonus, more taxes and the evil tobacco companies get the blame.

  6. If he wants to crack down on profiteering, I know of one organisation which makes an enormous profit on sales of tobacco.

  7. BwaB,

    I was taking it for granted that commenters here all knew not only that there is no effective difference but also that I know that there is no effective difference. Ah, well.

  8. Its not a tobacco tax but a levy on tobacco companies’ profits.

    First they will need to define what is and what is not a tobacco company, and incorporate that into the law. And then the tobacco companies will simply sidestep the law by slipping through the inevitable loopholes.

  9. @ Tim Newman

    A tobacco company is any company that sells anything derived from tobacco. Or, y’know, which *could* be derived from tobacco. Or which looks a bit like something that could be derived from tobacco.

    So that’s e-cig companies sorted. Just needs an exemption for Pharma, obv.

  10. TTG,

    Yes, but is this not exactly why, for instance, Camel make shoes? “Sadly we made a massive loss on tobacco this year, but happily we’re running the world’s most successful shoe company. Even though our shoes are shit.”

  11. £600 million? About eight hours’ worth of public spending? It’s like someone on 70K a year quibbling about 60 quid.

    Of course stamp duty should be abolished tout court, as it’s dreadfully inefficient. Explaining that to an autistic seat-sniffing wanker like Miliband is an impossible task, of course. Anyone who thinks that reinstating the 50% tax band is actually going to raise revenue is either too stupid or too ideologically hidebound to be worth reasoning with.

  12. “Anyone who thinks that reinstating the 50% tax band is actually going to raise revenue is either too stupid or too ideologically hidebound to be worth reasoning with.”

    Indeed, but the people you’re talking about are the core support Labour voters so Labour as a party are required to reinstate these taxes.

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