|Why Is This 18th Century Relic Still Around?|
|Topic||Government and the Economy|
|Key Words||stamp duty, tax, stock purchases, tax revenue|
|News Story||Britain has taxed property and stock shares for over two hundred years, and Parliament shows no signs of repealing it. A small tax, raising only about 0.8% of total government revenue, the stamp duty nevertheless has shown itself to be remarkably resilient over time
The property tax (also called a stamp duty) itself is assessed as only 0.5% of the market value of the trade, and is assessed only on domestic transactions. It's remarkably cheap to collect, costing only 3pence for every £100, compared to the corporate income tax that costs £1.42 for every £100 collected. At the same time, tax opponents claim that the tax is anti-competitive, since it is only assessed on domestic trades. If a foreign company were to buy a London firm, it would pay the tax once and never again, since the resulting firm would now be a foreign company. If a British firm were to buy a London company, it would pay the tax over and over again, for every transaction made, because the firm would remain a domestic company.
Other tax opponents argue that the tax reduces share price, and thus the incentive to engage in investment, which may require additional share purchases. What's more, it's not a tax on any sort of value-added, as other taxes would be; it's simply a tax on the transaction itself.
Perhaps this is why William Pitt the Younger in the late 18th century raised the value of the tax. Because he could.
|Source||"Licking the Stamp Duty." The Economist. 31 August 2006.|
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