24th November 2008
APCIMS calls for reduction in stamp duty as part of economic boost ahead of Pre Budget report
Ahead of the Government’s Pre-budget statement the Association of Private Client Investment Managers and Stockbrokers is calling for a stamp duty/SDRT reduction to 0.25% to help UK investors, boost UK share trading and put the UK on a more competitive footing.
Research for the Corporation of the City of London has suggested that the abolition of stamp duty/SDRT could add as much as £146bn to the value of UK shares. Indeed a the Forsyth Commission suggested that retaining stamp duty increases volatility of share prices and suppresses share value by 10%.
The stamp duty rate of 0.5% is the largest of any G7 country and has not been reduced since 1986. France, Germany, Italy, The Netherlands and Luxembourg have abolished stamp duty. The US stamp duty rate is 0.0003%.
David Bennett CEO of APCIMS said: “The reduction of stamp duty would be a shot in the arm for UK share trading, an encouragement to British investors and a boost to the UK’s competitive advantage. It is vital at a time of economic uncertainty that the Chancellor seriously considers this as part of a recovery package.”
Increasing competition between trading venues and between intermediaries in recent years has reduced the market costs of financial transactions. As a result, stamp duty has become an increasingly large proportion of overall transaction costs. At the same time, financial products that are exempt from stamp duty/SDRT such as Contracts for Difference and Spread Bets have become increasingly popular amongst private investors.
Unfortunately the announcement in the 2008 Budget to abolish stamp duty on share purchases up to a value of £1,000 only affected a tiny proportion of share transactions (so called residual securities which cannot be settled in the CREST system).
David Bennett CEO of APCIMS added: “The rate of stamp duty has remained unchanged since 1986 when the markets were far less global than they are now and international competition for financial market business was much less keen.
“It is critical for the Government to maintain UK plc as an attractive location for financial services industries and for investors to do business. The UK’s continuation of stamp duty/SDRT in the face of its abolition in competing financial centres can only be seen as a handicap, to the detriment of the UK’s international position.
“Whilst of course APCIMS would welcome complete abolition of stamp duty/SDRT, government finances may not make this realistic in the immediate future. We believe the Government should send a clear signal that it wishes to make the UK stock market competitive and reduce the rate of stamp duty /SDRT to 0.25 percent.”
Reducing the Stamp Duty SDRT rate to 0.25 per cent would represent a cost to Government (although not as large as the outright abolition of stamp duty/SDRT). However APCIMS believes it would send a message to business and the public about the value placed by the authorities on saving and investing for the future. Increased trading should also provide Government with increased tax receipts in other areas such as capital gains.
APCIMS welcomed the Conservatives’ commitment to ‘look carefully at the case for abolishing or reducing stamp duty on shares’ and now urges the Conservative Party to firm up this position in their manifesto ahead of the next general election.
- ENDS -
For more information please contact:
Dirk Paterson, Head of Communications, APCIMS
on 020 7448 7100
Mobile: 07507 855 428
Email: dirkp@apcims.co.uk
Notes to editors:
APCIMS
- More than 12 million people in the UK currently invest directly in stocks and shares and other financial instruments to secure their financial futures
- APCIMS represents over 140 firms all over the UK who deal primarily in stocks and shares on behalf of individuals and the institutions in which we have our money
- Around £400 billion of the country’s wealth is under the management of our members
- Our aim is to ensure that the regulatory, tax and other changes across Europe minimize impact on the investment community
- We want to lead the debate on regulation in Europe, with UK regulators and with British parliamentarians to make sure consumers are protected while at the same time our industry flourishes in the UK
Stamp Duty/SDRT
- Stamp duty of 0.5 percent is payable on the purchase of shares. Stamp duty is also payable if any shares are transferred to you, either electronically (SDRT) or by stock transfer forms.
- Stamp duty/SDRT currently provides the Government with around £3 billion a year in revenue.
- The Conservative Party announced that it was examining a reduction in stamp duty in a Conservative press release of 2 May 2007
- A Report by Oxera on behalf of the Corporation of the City of London, the Association of British Insurers and the Investment Managers Association in 2007 suggested that the abolition of stamp duty /SDRT would boost share values by £146 billion
- SDRT Stamp Duty Reserve Tax (SDRT) was introduced in 1986 to deal with transactions in shares where no instrument of transfer was executed and which were therefore outside the scope of Stamp Duty. It is a transaction tax, charged on ‘agreements to transfer chargeable securities’ unlike Stamp Duty which is charged upon documents.
- The Conservative Party Tax reform Commission chaired by Lord Forsyth of Drumlean, the former Scottish Secretary, reported its findings in 2006. The report suggests that stamp duty increases the volatility of share prices and harms the UK's attractiveness as a financial centre. The Commission believes the absence of stamp duty on shares has also led to the growth of offshore funds based in centres such as Dublin and Luxembourg and suggests that UK share are depressed by 10% as a result of the tax.