Rachel Reeves has been urged to scrap the stamp duty on share trading to revive the flagging stock market.
Figures from HM Revenue and Customs show the tax raised £4.3billion in the 12 months to the end of May – up 34 per cent on the £3.2billion brought in the previous year.
City analysts conceded that the idea of giving up this revenue stream ‘might make the Chancellor wince’ given the parlous state of the public finances. The Government borrowed another £17.7billion last month alone as it spent far more than it earned in taxes.
But experts warned the stamp duty on shares is discouraging investment in UK companies and making London a less attractive place for firms to list.
Investors pay a 0.5 per cent levy on the price of UK-listed shares they buy, but the tax does not apply to the purchase of shares in foreign companies.
It means a saver who buys £10,000 of shares in FTSE 100 giants such as Rolls-Royce or Marks & Spencer pays £50 in tax, but nothing to make the same investment in New York-listed Amazon or Microsoft.
Under pressure: Rachel Reeves has been urged to scrap the stamp duty on share trading to revive the flagging stock market
The clamour over the stamp duty comes as a flurry of London-listed companies are snapped up by foreign predators or defect to rival markets such as New York. At the same time, they are not being replaced due to a dearth of new listings through so-called ‘initial public offerings’ (IPOs).
Jonathan Webster-Smith, chief investment officer at Bowmore Asset Management, said: ‘The level of stamp duty on shares puts the UK stock market at a huge disadvantage to its key competitors.
‘Taxing the turnover of shares saps liquidity and ultimately makes London a less attractive capital market.
‘There is a valid concern about the number of UK companies leaving the London Stock Exchange for the US and the low number of IPOs. The Government should urgently address that by removing the stamp duty.’
Analysis by City broker Peel Hunt shows 30 London-listed companies worth more than £100m have been targeted by bidders so far this year including food delivery group Deliveroo, microchip specialist Alphawave and scientific equipment maker Spectris.
Anxiety over the health of the City intensified when fintech firm Wise announced plans to shift its main stock market listing from London to New York.
Charles Hall, head of research at the broker Peel Hunt and a leading campaigner for reforms to stem the outflow, said that if the Chancellor (pictured) cannot abolish the stamp duty, she should at least review it with a view to cutting the rate and extending its scope to include hedge funds and others that do not pay.
‘Stamp duty makes the UK uncompetitive in an increasingly global financial market,’ he said.
‘It makes no sense for ordinary investors to be penalised. The Government should announce a review with a clear focus on reducing the rate and increasing the scope of the tax.’
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