Prime Minister Andy Burnham faces growing pushback over proposed UK wealth taxes while pharmaceutical giant AstraZeneca abandons a planned merger with American rival Bristol Myers Squibb. Reports indicated Burnham sought economic advice from a triumvirate of former Goldman Sachs economist Jim O'Neill, ex-Bank of England economist Andy Haldane, and recently departed Office for Budget Responsibility head Richard Hughes. Securing their full-time or part-time attention is proving difficult due to Burnham's support for wealth taxes to pay for affordable housing and increased defence spending.
Popular support for wealth levies gained ground after football presenter Gary Lineker and fellow multimillionaires volunteered to pay more tax. That argument lost momentum following allegations that some supporters used legal tax avoidance schemes. O'Neill, a former Conservative minister who helped drive regional economic policy and actively invests in British technology, expressed strong scepticism regarding the tax proposals.
Specific proposals include taxing capital gains at the same rate as income and closing the "carried interest" loophole for private equity executives. Critics fear such measures could be the last straw for British entrepreneurs. However, economist Gabriel Zucman of the University of California argued that a wealth tax on individuals with assets of £100million or more could yield substantial revenue while avoiding penalties on start-ups and innovators.
Tax Enforcement and Economic Warnings
Zucman suggested a clause forcing individuals subject to the tax to continue paying UK taxes for a decade after moving abroad. The enforcement of such a measure by HM Revenue and Customs remains complex. Economic bodies have raised serious warnings about new levies on wealth.
An analysis by the Institute for Fiscal Studies last year stated that an annual wealth tax "would penalise investment and savings", which serve as key drivers of economic growth. Additionally, the International Monetary Fund warned in its recent inspection that the UK is close to peak taxation, making yields from new taxes negligible as Chancellor John Healey considers options.
AstraZeneca Merger Talk Collapses
In corporate news, investment bank advisers worked frantically early last week to structure a proposed pharmaceutical merger between Britain's AstraZeneca and American competitor Bristol Myers Squibb. The prospective deal failed to materialize after details leaked to the Financial Times. The breakdown echoed a previous report by the Wall Street Journal that Shell was preparing a bid for BP, a deal that also fell through after government intervention.
In the BP case, the UK Government asked Shell to stand by as a "white knight" to prevent an overseas takeover. Similarly, Downing Street was put on alert over the AstraZeneca talks due to fears that the FTSE star could shift its corporate home to the United States. Chief executive Pascal Soriot has sought scale in the American market, where AstraZeneca is outgunned by Eli Lilly and other pharmaceutical companies.
Soriot had previously doubled down on the US market by securing a New York stock listing and promising $50billion in investment. However, AstraZeneca's divided board opposed the transaction and halted engagement after £17billion was erased from the company's share value. Soriot, who built AstraZeneca from an also-ran into an £185billion immunology powerhouse, retains investor support despite the setback.
Liverpool FC Takeover Interest
In sports finance, Liverpool FC supporters expressed excitement over reports that Amazon founder Jeff Bezos may join an investor consortium placing a £4.4billion valuation on the club. Bezos previously entered new territory by purchasing the Washington Post in 2013. However, that acquisition led to significant workforce cuts earlier this year when one-third of the newspaper's staff, including most of the sports department, was axed.
