‘It’s time to bring in a financial transaction tax to boost government revenue’

Martin Shipton

A retired academic from Penarth has urged Chancellor John Healey to introduce a financial transaction tax that could raise billions of pounds a year for the UK Treasury.

Dr Max Wallis, a former lecturer at Cardiff University, has written a briefing document which states: “US trade disruption under President Trump’s renewed tariff strategy has weakened longstanding assumptions about frictionless global trade.

“Major economies are increasingly experimenting with microtaxation of financial flows, not only traditional Financial Transaction Taxes (FTTs).

“The US 2025 Wall Street Tax Act (S.2127) proposes a phased levy on securities and derivatives, starting at 0.02% in 2026 and rising to 0.1%. This is the first serious US legislative attempt at a broad-based FTT in over a decade. This movement signals that transaction-based taxation is no longer politically fringe.

“Several EU states – Ireland, Poland, Slovakia, Spain, Greece, France and Italy – currently operate targeted transaction taxes:

• France: 0.3–0.4% equity FTT on large listed French companies; additional levies on high-frequency trading;
• Italy: FTT of 0.04–0.4% on qualifying cash equity transactions and a structured levy on certain derivatives;

“When Sweden imposed a tax on fixed-income securities in 1990, trading activity migrated substantially offshore, particularly to London, and revenues fell short. The fixed-income tax was abolished in April 1990 and the remaining transaction taxes by the end of 1991. The Swedish experience warned that a geographically mobile tax base can relocate.

“The UK has long used stamp duty on share purchases (raising £3–4bn annually) and now tolerates big credit card fees.

“UK card payment charges are distinguished from taxes. Under the UK Interchange Fee Regulation, interchange on qualifying domestic consumer transactions is capped at 0.2% for debit cards and 0.3% for credit cards. Interchange is normally one component of the merchant service charge paid by merchants; the overall merchant service charge is not capped.

“Card-payment charges generate commercial income within the payments system rather than tax receipts for the Exchequer, but can be viewed as an existing UK transaction levy. These demonstrate that FTTs can coexist with competitive financial markets, provided they are narrowly designed and predictable.”

Politics

Turning to the political dimension, Dr Wallis writes: “The Labour Party has historically supported general transaction taxes, but only if implemented internationally. Such international agreement is no longer realistic, given geopolitical fragmentation and US tariff policy. However, unilateral action is entirely feasible, and the UK already operates unilateral transaction taxes (stamp duty). The barrier is therefore not feasibility, but institutional resistance.

“UK banks have traditionally opposed any extension of transaction taxes, arguing that they affect liquidity, competitiveness and settlement efficiency. This position is increasingly difficult to defend:

• Banks are currently reporting record profits, partly due to elevated interest margins.
• Public and parliamentary scrutiny of bank profitability is rising.
• A levy at a minimal rate (0.01%) would be negligible relative to daily liquidity flows but significant in aggregate revenue.

“The political optics have shifted: banks’ resistance no longer aligns with public sentiment or fiscal reality.

“Several converging factors make 2026–27 unusually favourable for UK action:

• Fiscal pressure: The UK needs stable, non-inflationary revenue sources.
• International cover: The US is moving toward a federal FTT; France and Italy already have them.
• Market conditions: High profitability and strong liquidity reduce the risk of destabilisation.
• Policy alignment: A micro-levy fits Labour’s historic position while avoiding the need for global coordination.

“A 0.01% levy on selected transaction classes – CHAPS (Clearing House Automated Payment System – a same-day electronic payment system for processing payments in pounds sterling), securities, derivatives or interbank transfers – would be politically defensible, administratively simple, and capable of raising billions without noticeable friction for households or businesses.”

Dr Wallis said: “It’s time to bring in a financial transaction tax to boost government revenue.”

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