Britain cuts transaction and fund taxes to boost City
LONDON, March 20
LONDON, March 20 (Reuters) - Britain's government is seeking to lure mutual fund assets and encourage equity investment with plans to scrap a tax on UK-domiciled funds and a levy on trades in small company shares.
In a budget statement to parliament on Wednesday, Britain's finance minister George Osborne said he plans to abolish the Schedule 19 tax on UK funds to attract funds away from rival European centres.
He also pledged to abolish stamp duty on shares traded on markets like the London Stock Exchange's AIM, favoured by small companies, to end a perceived bias in the tax system favouring debt financing over equity investment.
"Financial services are about much more than banking. In places like Edinburgh and London, we have a world-beating asset management industry but they are losing business to other places in Europe," Osborne said.
Both measures were welcomed by the financial services industry.
"We wholeheartedly welcome the Chancellor's decision to do away with stamp duty tax on UK domiciled funds and AIM shares," said Tony Stenning, Head of UK Retail at BlackRock.
"These have long been perceived as stealth taxes hampering savers' needs for their money to work as hard as possible for them, particularly during these hard times of low interest rates."
Fund management industry association the IMA said it will help Britain, already a hub for portfolio management, compete as a location for funds and their support services.
While London and Edinburgh are the locations for teams of fund managers at blue chip firms like Schroders and Aberdeen Asset Management, more funds are domiciled in Dublin and Luxembourg.
According to Lipper, a Thomson Reuters company that tracks the funds industry, around $1.24 trillion of mutual fund assets are domiciled in Dublin and $2.8 trillion in Luxembourg compared with around $1.1 trillion in the UK.
"Locations that don't have the asset management are now effectively providing more support services than we are," Daniel Godfrey, Chief Executive of the IMA told Reuters.
"(The UK government) has recognised the point that those support services are not necessarily a small adjunct to asset management."
The abolition of stamp duty on trading shares on London's junior market AIM has long been called for by small businesses and their advisors who say it will help improve the availability of equity funding at a time when bank lending is constrained.
"The removal of stamp duty on trading in AIM quoted stocks is a very significant event for the growth market," said Philip Secrett, Partner at Grant Thornton UK.
"Coupled with the recent rallies in global equity markets, this stimulus should contribute to the growing momentum of confidence and drive larger volumes of funds towards existing AIM companies and new IPOs."
- Thai PM calls snap election, protesters want power now |
- North Korea says Kim's powerful uncle dismissed for 'criminal acts'
- Protesters fell Lenin statue, tell Ukraine's president 'you're next'
- Storm pushes up U.S. East Coast after deep-freeze in the South
- Venezuela's Maduro to raise pressure on business after local vote