The chairman of Abrdn has said that scrapping the tax on share purchases would lift the economy and boost investment in British firms, adding to the growing calls to abolish the 0.5 per cent levy.
Sir Douglas Flint has said eliminating the stamp duty on shares, which he described as “grit in the machine”, would encourage more investment in UK shares.
“Savers pay for it,” he told The Mail on Sunday, adding that it is “not a good idea if you are trying to encourage a culture of share ownership.”
In recent months, a slew of firms and industry groups have criticised the charge on share trading, arguing it penalises UK investors and stifles capital flow at a crucial time for the market.
London’s stock exchange has faced scrutiny as many firms such as Arm and Flutter have abandoned London in search of higher valuations, often heading to New York.
The charge is currently slapped on any share transaction for a company incorporated in the UK and brings in around £3.3bn to the Treasury’s coffers every year, effectively 0.3 per cent of the UK’s total tax take.
Flint said the reason to abolish the tax is threefold: “First, it is a cost that comes out of people’s accumulated life savings. Second, it is a disincentive to invest in UK companies. Third, liquidity is good for markets but if you put in place a barrier in the form of a cost every time you deal, then you restrict it.”
Despite the calls, ministers and regulators show no signs of budging on the tax. The Treasury claims it is a revenue raiser that does not block “the ability of businesses to access capital” or impede “London’s position as a global centre for listing companies”.
But research shows there is strong investor interest in UK shares, which could increase if the tax is removed. An Abrdn survey revealed over a third of respondents would prefer to invest £1,000 in the UK market over others.
And the Centre for Policy Studies (CPS) has found that abolishing the tax could boost pensions, savings, and investments at little cost to taxpayers.
The think-tank has said removing the levy, which it calls a “tax on growth”, would result in a £6,000 increase in typical pension pots and a 0.7 per cent rise in long-term economic growth. Business investment could increase by £6.8bn, compared to the £3.2bn revenue the tax is expected to raise this year.