Press releases 2000
31 January 2000
RESEARCH HIGHLIGHTS BENEFITS OF ABOLISHING STAMP DUTY
New research published today by the London Stock Exchange highlights the implications for the economy of abolishing stamp duty on share trading.
The research, undertaken on behalf of the Exchange by London Economics, found that abolition of stamp duty could:
- increase the volume of UK companies' shares traded on the London Stock Exchange by some 40%;
- provide a one-off increase in Capital Gains Tax of around 6 billion to offset the 2.5 billion revenue lost;
- give increased revenue from corporation and income taxes;
- bring net efficiency gains to the economy of around 3 billion;
Reducing the rate of duty would bring similar, but smaller, benefits.
The research also concluded that the continuing imposition of stamp duty could over time harm the City of London's competitiveness as -
- increasing harmonisation of European markets and investment by sector lead investors to choose non-UK European stocks as substitute investments;
- pressure on transaction costs leads investors to seek alternative UK investment opportunities that are not subject to stamp duty;
- stamp duty forms a growing proportion of the costs of capital-raising for UK companies;
- its presence could encourage UK companies with European and global interests to transfer all or part of their share registers to overseas jurisdictions that do not impose share transaction tax.
Commenting on the findings, Gavin Casey, Chief Executive of the London Stock Exchange, said: "The new research highlights the economic gains and alternative sources of revenue for the government that could arise from ending stamp duty. Its abolition would make a real contribution to London's competitive position at a time when pressure on the cost of trading is greater than ever. This historic tax is out of place in today's internationally competitive environment."
The findings of London Economics' research formed the basis of the Exchange's annual Budget submission to the Chancellor of the Exchequer, in which the Exchange urged the Government to abolish stamp duty in order to consolidate and strengthen London's international competitive position.