TaxCorporate TaxStamp out the duty on shares

Stamp out the duty on shares

I can’t help but feel that the debate on stamp duty on shares has slightly missed the point

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
anyway.

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
predicament.

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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