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LSE Chiefs See Axe Falling On Share Tax

by Robert Lee,, London

18 May 2007

London Stock Exchange Executives have suggested that it is only a matter of time before the UK government bows to pressure from the financial services industry and scraps stamp duty on stocks and shares.

Clare Furse, chief executive, told a news conference, convened to announce the exchange's full-year results, that: "the question is not if but when" the 0.5% tax on the trading of shares of companies listed in the UK will end.

Furse claimed that there has been a "significant shift" in the government's thinking since the publication of a report by Oxera, an independent economics consultancy, that concluded stamp duty repeal would bring about multiple benefits for the UK economy without denting the Treasury's long-term tax take.

The study, commissioned by the LSE, the Association of British Insurers (ABI), the City of London Corporation, and the Investment Management Association (IMA) suggested that ordinary savers and pensioners are bearing the brunt of the tax, which is reducing their ability to save and invest for the future.

The report revealed that stamp duty reduces a typical occupational pension scheme fund at retirement by between 1.52% and 2.38%, or between GBP6,441 and GBP11,538 in today's money. Government schemes such as Stakeholder Pensions are also said to be impacted significantly, by GBP7,540 to GBP10,389.

Although stamp duty yields GBP3 billion annually for the UK Treasury, the research calculated that if the tax were to be abolished, these receipts would be replaced over the longer term through a sustained rise in the UK's GDP of between 0.24% and 0.78%.

The UK is the only major financial centre to still charge such a tax on share trading, but according to LSE Chairman Chris Gibson-Smith, the Treasury is now open to the idea of axing stamp duty to maintain the City's competitiveness.

Gibson-Smith added that the exchange was currently in discussions with the Treasury Minister Ed Balls on how to take the proposal forward - a claim denied by the Treasury.

"It must be remembered that stamp duty makes an important contribution to the public finances and provision of public services," a Treasury spokesman was quoted as stating by Dow Jones Newswires.

"Any suggestion of abolition without a sensible alternative source of revenue risks either significant cuts in public expenditure or tax increases elsewhere."

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