Chancellor Urged To Cut Dividend Tax By 9%

by Robert Lee, Tax-News.com, London

16 July 2003

Business consultancy firm BDO Stoy Hayward is urging the Chancellor of the Exchequer, Gordon Brown, to cut dividend tax rates in the UK by at least 9% in response to the recent dividend tax cut enacted in the United States.

As it stands, UK investors will now be paying up to twice as much tax on share dividend income as their American counterparts after the Bush administration pushed through a tax cut that has reduced dividend tax to 15% for the typical investor. The rate in the UK currently stands at 32.5%. A short term cut in rates similar to the recent US policy will give the UK's equity markets a much needed shot in the arm, the firm argues.

"It is naïve to think that the tax treatment of dividends and capital gains has no impact on investment decisions," Stephen Herring, tax partner at BDO Stoy Hayward observed this week, adding that:

"The Chancellor needs to accept that meeting the increasing demands for public spending on health and education, can only be borne in the long term out of the broader tax base generated by a growing economy. A short-term reduction of 9% on dividends should be implemented to promote confidence in the equity markets and encourage an upsurge in the UK economy."

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