Up to now calls to scrap the tax have centred around arguments that the duty
puts stock markets at a disadvantage to private equity groups, who receive
generous interest relief tax breaks.
This is a fair enough point, but for me the real question is whether the tax
on shares is actually targeting the ‘stakeholders’ it is meant to.
Prime minister-in-waiting Gordon Brown and the Treasury (who net around £3bn
annually from the tax, by the way) have always sold the duty as a City tax. A
tax targeted at wealthy hedge funds and brokerages who can afford the extra cost
But how many of these hedge funds and brokerages actually pay their 0.5% of
every share trade to the taxman? Not many I suspect.
Hedge funds and the like can easily avoid the tax altogether by using
contracts for difference and other financial instruments to trade stocks without
paying a penny in stamp duty.
So who does that leave to pick up the tab for the £3bn every year? Probably
you and me.
Private investors without access to, or knowledge of, the heady world of CFDs
are stuck paying stamp duty every time they make a trade, while long-only
pension funds, who actually own and trade shares, are stuck in a similar
The real issue the Treasury needs to wake up to is that stamp duty on shares,
its self-proclaimed tax on the City, is anything but that. It is a tax on the
ordinary man on the street.
Forget private equity or boosting British business. If there is a reason to
scrap the tax, this is the most compelling.
Nicholas Neveling is a reporter on Accountancy Age
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