Britain’s government should revamp the current tax regime for share trading to boost the overall competitiveness of the U.K.’s capital markets, Barclays says.
The bank is contending in a new report published Monday that the Stamp Duty Reserve Tax, a 0.5% levy on share transactions, should be reduced or abolished for purchases taking place on the London’s main market. The move would likely boost annual investment into companies on the FTSE of up to £6.8 billion ($9 billion), according to consultancy Oxera.
British policymakers are in the process of overhauling the three-century-old London Stock Exchange to make it more competitive and reverse a trend of companies choosing to list overseas or go private. Earlier this year, building materials giant CRH and sports betting operator Flutter switched their listings from London to New York earlier.
Afterward, British regulators overhauled their listing rules to make London more attractive to investors, and Barclays acknowledged that the changes had removed requirements that were a barrier for some companies moving from a junior market—Alternate Investment Market and the Aquis Growth Market—to a senior market.
The stamp duty was abolished for the AIM in 2014, and it’s been a popular idea among London’s financiers, but it would come at a cost. The Treasury raised £3.8 billion from the SDRT during the last fiscal year.
Since coming to power in July, the Labour government has complained incessantly about the problems it has inherited from the Conservatives, including unsubstantiated claims of leaving a £22 billion black hole in this year’s budget. Chancellor Rachel Reeves warning of “painful” decisions to repair the public finances when she unveils her fist budget next month.
Some of the other recommendations from Barclays policy development team included removing the requirement for a prospectus when a company moves to the main market if it has been listed on a junior market for at least 18 months. Barclays also suggested the government should sustain tax incentives for investors in AIM-listed companies for a limited period when the companies switch to the main market.
“Tax policy is a strong tool for influencing companies’ decision-making. The alleviations from Inheritance tax and capital gains tax are seen as particularly powerful in relation to founder-led companies,” Barclays says.