The government must scrap stamp duty taxed on share trades or risk a growing number of firms quitting London for the New York Stock Exchange, investment bank Peel Hunt has warned.
As much as £200m is already set to be lost from government tax receipts by the decision of Astrazeneca, the FTSE 100’s largest constituent, to upgrade its US listing from depositary receipts to a direct listing, a move likely to trigger a growing proportion of the firm’s shares to be traded in the US, where there is no stamp duty.
If Astrazeneca’s move is successful, the diminishing share of its stock traded in London could prompt the firm to abandon its London Stock Exchange listing altogether, Peel Hunt said.
Astrazeneca’s success would also be highly likely to encourage other FTSE 100 firms to make the same move, rapidly eroding London’s status as a major stock exchange venue as well as wiping out the roughly £4.5bn collected from stamp duty on shares.
“Astrazeneca’s move is therefore set to reduce stamp duty receipts [by] 5 per cent, a figure that would increase if other companies follow its lead,” said head of research at Peel Hunt, Charles Hall.
“Assuming Astrazeneca has a positive experience, we believe that other companies will follow.
“In fact, boards would be negligent if they did not consider this.”
‘The challenge is clear’
Hall has proposed scrapping stamp duty altogether to avoid Astrazeneca’s move precipitating a wider exodus from the FTSE.
He suggested the policy change could result in a net gain for the Treasury, because the loss from stamp duty receipts would be more than offset by a rise in equity valuations and a concomitant increase in capital gains receipts from shares sold thereafter.
“The proposed changes from Astrazeneca mean that this shifts from being a niche topic to an essential item for the government to address,” Hall said.
“The challenge is clear – do we want to have one of the leading equity markets in the world, and retain our largest companies, or are we prepared to let the revenues leave, lose our key companies, and all the considerable value that they provide to the UK?”