Labour-supporting tax expert slams Rayner's raid on taxpayers
The influential tax expert Dan Neidle said a number of the tax rises contained in Ms Rayner's leaked memo could deter investment in UK companies and undermine 'the progressivity of the tax system'.
He also questioned whether some of the proposals could raise as much as the Deputy Prime Minister had suggested.
The Telegraph revealed on Tuesday that Ms Rayner sent a secret memo urging Rachel Reeves to raise taxes instead of cutting spending.
Mr Neidle is the founder of think tank Tax Policy Associates and also a member of Labour, however he has been critical of the party's policies in the past.
The tax lawyer said that half of Ms Rayner's proposals 'make sense from a policy perspective', including closing the commercial property stamp duty loophole and removing inheritance tax relief on Aim shares.
However he poked holes in some of the calculations on her memo. For example, he told The Telegraph that closing the stamp duty loophole for commercial property could raise anywhere between £700m or £2bn, as opposed to the estimate of £1bn cited in Ms Rayner's memo.
In addition, scrapping inheritance tax relief on Aim shares would probably raise only a tenth of the £1bn figure mentioned by Ms Rayner, he wrote in an article for Tax Policy Associates.
In the same article, Mr Neidle criticised Ms Rayner's proposal to reintroduce the lifetime allowance, a £1.07m cap on how much someone could save into their pension over their lifetime without incurring a tax charge.
The cap was abolished by the Conservative government because it encouraged doctors to work fewer hours in order to avoid a huge tax bill.
Mr Neidle said: 'These problems haven't gone away, and so it seems unlikely Labour is about to change its mind about changing its mind on the lifetime allowance.'
Ms Rayner also proposed extending the freeze on the additional rate tax threshold beyond 2028, when it is currently set to rise in line with inflation. This would result in a larger number of workers paying 45pc tax as their wages crossed the £125,140 earnings threshold.
Mr Neidle pointed out that the additional rate threshold was already much lower than it had been in recent years. For example, in 2009 the additional rate threshold stood at £150,000 – worth £240,00 in today's money.
Mr Neidle wrote: 'Freezing tax thresholds is not good tax policy. It's a large tax increase, but a hidden one. It undermines the progressivity of the tax system to have the highest rates paid by more and more people. And it doesn't affect the seriously rich, just the moderately high-earning.'
Mr Neidle also said the case for raising rates on dividend tax – another of Ms Rayner's proposals – was 'not persuasive'.
Ms Rayner has pressed the Chancellor to align the higher and additional rates of dividend tax with those of income tax.
As a result, a higher earner would pay 40pc tax on dividend income as opposed to the current rate of 33.75pc, while an additional rate taxpayer would see the charge jump from 39.35pc to 45pc.
Mr Neidle said the UK's dividend tax rate was already 'one of the highest' in the Organisation for Economic Co-operation and Development (OECD) and warned that increasing it could deter investors.
He wrote: 'We want to encourage people to invest in companies, and too high a rate of dividend tax won't do that.'
The Deputy Prime Minister and the Cabinet Office were approached for comment.
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