1/4% Tax on all stock trades pushed in NY Times today
- Thread starter seasideheights
- Start date
Great point - I'm happy to trade 1k shares and take .20 out of it; over and over again; a .25% tax on each side would kill day trading as we know it.
At least it's just talk for now, by non-policy makers, an isolated incident, but it goes to show how the "grab rich folks' money and give it to the poor folks" socialists are mis-thinking. Big govt and high taxes are bad. For a lot of reasons. And we're about to see the spend-pork fest of our lifetimes, with what'll likely be a 1.5T+ "stimulus" bs effort in '09.
Let's hope our trading dollars don't get co-opted into the socialist feeding frenzy.
-k
Guys, not to worry!
There are plenty of other markets in the world to trade, if this law was ever to be passed. Like someone mentioned erlier, open a new account somewhere else, you will only have to adjust your working hours.
As far as I know, Dubai is one of the owners of OMX. I am shure they will welcome this oppertunity gladly, and arrange everything so that trading from abroad in their markets will be no sweat at all.
There are plenty of other markets in the world to trade, if this law was ever to be passed. Like someone mentioned erlier, open a new account somewhere else, you will only have to adjust your working hours.
As far as I know, Dubai is one of the owners of OMX. I am shure they will welcome this oppertunity gladly, and arrange everything so that trading from abroad in their markets will be no sweat at all.
I really don't think this is a possibility because program trading and arbitragers make up such a high percentage of the markets' exchange volume, and they deal with razor thin margins.
I have too much faith in all the major players, not to mention sensible economists, to speak out powerfully and effectively against this kind of nonsense if its ever seriously considered in congress. It could destroy liquidity, making the markets even more vulnerable to manipulation.
I have too much faith in all the major players, not to mention sensible economists, to speak out powerfully and effectively against this kind of nonsense if its ever seriously considered in congress. It could destroy liquidity, making the markets even more vulnerable to manipulation.
Even if this got passed, it would not be long before it got repealed. If you start taxing traders too much where they are forced to quit, then the income tax they pay in will drop drastically and actually cause the govt to go even further in the hole. The same thing would happen to the brokers and clearing firms as their income tax liability would decline greatly as well.
i agree catch 22 for the govt. money can be taxed but also the loss of taxable income as well.
just to let everyone know and calm fears i have a friend who trades prop in the uk and he laughs everytime i bring this up because he always says just follow the smell of money the powers to be are always 3 steps ahead. this is a scam on the retail community, lucky for me i happen to be on the other side of that trade. meaning he can still trade like a mad man and that . 5 stamp tax is for the fish.
this thing gets me in the nerves, but no worries. there's no way this thing passes. US will actually end up losing money if they enacted this proposal. and eastern asia will rise as the new leader of the world financials.
The Increasing Impact of Stamp Duty on the UK Economy"
Don Cruickshank
Chairman, London Stock Exchange
Thursday 13 December 2001
Good morning ladies and gentlemen.
It's a great pleasure to speak at this session especially as you've allowed me to talk about the iniquity of imposing stamp duty on the financing costs of British - but only British - companies.
The tax is levied by the Treasury at 0.5% on purchases in the shares of British companies, a rate unchanged since 1986. The City of London is the only one of the three major financial centres with such a tax - New York and Tokyo sensibly go without. And no modern economy, or aspiring modern economy, imposes such a burden on its wealth producing companies.
I was asked about it by the Today programme after the failure of the Chancellor to mention it in his Pre-budget Review. Here's what I said:
"I'm here talking on behalf of British companies. This is not about speculators, stockbrokers or money men. Stamp duty is a tax that raises the cost of risk capital. It's an unseen cancer eating away at British companies' ability to invest, create jobs and raise productivity. Without more investment, without more higher quality jobs, without raising productivity sharply, the chances of being able to afford a world class health service are slim to non-existent.
The richer the country, the higher the proportion of its wealth it spends on health care. Britain is not a particularly rich country and it needs wealth creating investment to become one. Knowingly opting for lower investment through the imposition of stamp duty beggars belief. Every modern economy has virtually got rid of such a transaction tax. None would ever think of introducing one. Why? Why? Does Britain keep it?"
The Today programme ran the sentence with "cancer" in it. Predictable!
But here I am to try again. To explain why this tax is so damaging, and has to go.
I've been struck by how many policy makers believe it to be a "victimless" and "painless" tax. Let me give you just two examples of real victims.
In a previous life as Director General of OFTEL, I was required to regulate BT's prices. One of the factors that weighed heavily on setting price controls in a capital intensive industry was the company's cost of capital. I found that for BT, it seemed to be around 100 basis points higher than its US counterparts. BT is an international company. Why shouldn't I use international costs of capital? And why is it so much higher? In the end I gave in and that meant prices were higher so that BT could afford the cost of its risk capital. It also meant higher telephone bills.
Another example. When we surveyed British companies - the FTSE 100 in fact - on the effect of a lower cost of risk capital, they said it would translate into more investment, more jobs and make their companies more competitive. In other words, more, more productive, higher paid jobs.
This issue really, really matters to consumers and workers across the whole of the economy. Unless you work for the subsidiary of a foreign company of course, in which case, in a peculiar example of discriminating against your own, the UK Treasury lets your company off the hook.
Pre-Budget Report
Ahead of last month's Pre-Budget Report or PBR, the London Stock Exchange worked tirelessly to present Ministers with credible evidence that abolition of stamp duty would boost investment and benefit the UK economy. As part of that process, I met with and had a running correspondence with the Chancellor.
We joined in pressing the case for action with The Hundred Group of Finance Directors, National Association of Pension Funds, Confederation of British Industry, London Investment Banking Association and Association of British Insurers. Many different business and financial interests - not just the City.
We made a lot of progress in heightening understanding of the impact of the tax on the Treasury's productivity and competition agenda.
We were naturally extremely disappointed that there was no mention of the issue in the PBR. In the midst of a war on terrorism and a war on under-funding in the NHS, action on stamp duty was presumably considered a luxury the country cannot yet afford.
I want to set out why we believe - in concert with many others in finance and business - action is so badly needed on this front.
Maintaining a World Class Economy
The critical question that a Government attempts to answer through its economic policy is:
What balance should be achieved between incentivising the wealth creating sectors of the economy and properly resourcing public services?
I've been Chief Executive of the NHS in Scotland and I've worked as Chief Executive of a listed company. I believe I have the necessary credentials to discuss what is a sensitive question. I would argue that in order to afford a world class health service, the Government needs to nurture the basis of a world class economy.
But what do we see? Spending on public services rising much faster that GDP growth - and the gap is growing - while productivity still lags far behind our major competitors - and if anything the gap is growing too.
I have no doubt that abolition of stamp duty would make a notable contribution to closing the productivity and GDP growth rate gap with the United States, France and Germany.
British companies subject to stamp duty account for around 60% of gross business investment in the UK. They're not a large number by volume but their investment plans - and the resulting tax receipts - are the engine for growth needed to fund expansion of public services.
Abolition would free up 3 billion of extra annual investment.
It would result in around 1.2 billion in corporation tax receipts from these companies.
It would add around 0.4% to the currently static total of business investment as a proportion of GDP.
And the resulting productivity growth would pay off any revenue shortfall in probably less than five years.
Impact of Abolition on the Cost of Capital of UK Companies
So how exactly does stamp duty feed through into the investment levels of UK companies? And why is its impact increasing?
It begins with the trading of their shares.
Investors require minimum rates of return, net of all taxes and other transaction costs. This means there is a direct relationship between transaction costs and the required pre-tax return.
Traditionally, UK investors have invested in UK equities for those returns because the cost constraints of investing elsewhere have been prohibitive. The costs of stamp duty have therefore been passed on to UK investors.
But now overseas equity trading costs are converging on those charged to domestic clients. The proportion of UK pension schemes' assets allocated to overseas equities has increased from 8% in 1980 to nearly a quarter last year - and it's rising fast.
As investment becomes more pan-European and brokers, exchanges and settlement engines develop the infrastructure to support this, operational costs will come down further. Institutions are facing more and more of a choice in where to allocate their funds.
Earlier in the year, we looked at comparative trading costs. We found that in order to transact a typical 10,000 retail trade, for example, it cost:
1.06% to a GERMAN investor purchasing GERMAN shares
1.13% to a UK investor purchasing GERMAN shares
1.44% to a UK investor purchasing UK shares
- 0.94% without stamp duty
With stamp duty attached, it's actually more expensive to trade
Don Cruickshank
Chairman, London Stock Exchange
Thursday 13 December 2001
Good morning ladies and gentlemen.
It's a great pleasure to speak at this session especially as you've allowed me to talk about the iniquity of imposing stamp duty on the financing costs of British - but only British - companies.
The tax is levied by the Treasury at 0.5% on purchases in the shares of British companies, a rate unchanged since 1986. The City of London is the only one of the three major financial centres with such a tax - New York and Tokyo sensibly go without. And no modern economy, or aspiring modern economy, imposes such a burden on its wealth producing companies.
I was asked about it by the Today programme after the failure of the Chancellor to mention it in his Pre-budget Review. Here's what I said:
"I'm here talking on behalf of British companies. This is not about speculators, stockbrokers or money men. Stamp duty is a tax that raises the cost of risk capital. It's an unseen cancer eating away at British companies' ability to invest, create jobs and raise productivity. Without more investment, without more higher quality jobs, without raising productivity sharply, the chances of being able to afford a world class health service are slim to non-existent.
The richer the country, the higher the proportion of its wealth it spends on health care. Britain is not a particularly rich country and it needs wealth creating investment to become one. Knowingly opting for lower investment through the imposition of stamp duty beggars belief. Every modern economy has virtually got rid of such a transaction tax. None would ever think of introducing one. Why? Why? Does Britain keep it?"
The Today programme ran the sentence with "cancer" in it. Predictable!
But here I am to try again. To explain why this tax is so damaging, and has to go.
I've been struck by how many policy makers believe it to be a "victimless" and "painless" tax. Let me give you just two examples of real victims.
In a previous life as Director General of OFTEL, I was required to regulate BT's prices. One of the factors that weighed heavily on setting price controls in a capital intensive industry was the company's cost of capital. I found that for BT, it seemed to be around 100 basis points higher than its US counterparts. BT is an international company. Why shouldn't I use international costs of capital? And why is it so much higher? In the end I gave in and that meant prices were higher so that BT could afford the cost of its risk capital. It also meant higher telephone bills.
Another example. When we surveyed British companies - the FTSE 100 in fact - on the effect of a lower cost of risk capital, they said it would translate into more investment, more jobs and make their companies more competitive. In other words, more, more productive, higher paid jobs.
This issue really, really matters to consumers and workers across the whole of the economy. Unless you work for the subsidiary of a foreign company of course, in which case, in a peculiar example of discriminating against your own, the UK Treasury lets your company off the hook.
Pre-Budget Report
Ahead of last month's Pre-Budget Report or PBR, the London Stock Exchange worked tirelessly to present Ministers with credible evidence that abolition of stamp duty would boost investment and benefit the UK economy. As part of that process, I met with and had a running correspondence with the Chancellor.
We joined in pressing the case for action with The Hundred Group of Finance Directors, National Association of Pension Funds, Confederation of British Industry, London Investment Banking Association and Association of British Insurers. Many different business and financial interests - not just the City.
We made a lot of progress in heightening understanding of the impact of the tax on the Treasury's productivity and competition agenda.
We were naturally extremely disappointed that there was no mention of the issue in the PBR. In the midst of a war on terrorism and a war on under-funding in the NHS, action on stamp duty was presumably considered a luxury the country cannot yet afford.
I want to set out why we believe - in concert with many others in finance and business - action is so badly needed on this front.
Maintaining a World Class Economy
The critical question that a Government attempts to answer through its economic policy is:
What balance should be achieved between incentivising the wealth creating sectors of the economy and properly resourcing public services?
I've been Chief Executive of the NHS in Scotland and I've worked as Chief Executive of a listed company. I believe I have the necessary credentials to discuss what is a sensitive question. I would argue that in order to afford a world class health service, the Government needs to nurture the basis of a world class economy.
But what do we see? Spending on public services rising much faster that GDP growth - and the gap is growing - while productivity still lags far behind our major competitors - and if anything the gap is growing too.
I have no doubt that abolition of stamp duty would make a notable contribution to closing the productivity and GDP growth rate gap with the United States, France and Germany.
British companies subject to stamp duty account for around 60% of gross business investment in the UK. They're not a large number by volume but their investment plans - and the resulting tax receipts - are the engine for growth needed to fund expansion of public services.
Abolition would free up 3 billion of extra annual investment.
It would result in around 1.2 billion in corporation tax receipts from these companies.
It would add around 0.4% to the currently static total of business investment as a proportion of GDP.
And the resulting productivity growth would pay off any revenue shortfall in probably less than five years.
Impact of Abolition on the Cost of Capital of UK Companies
So how exactly does stamp duty feed through into the investment levels of UK companies? And why is its impact increasing?
It begins with the trading of their shares.
Investors require minimum rates of return, net of all taxes and other transaction costs. This means there is a direct relationship between transaction costs and the required pre-tax return.
Traditionally, UK investors have invested in UK equities for those returns because the cost constraints of investing elsewhere have been prohibitive. The costs of stamp duty have therefore been passed on to UK investors.
But now overseas equity trading costs are converging on those charged to domestic clients. The proportion of UK pension schemes' assets allocated to overseas equities has increased from 8% in 1980 to nearly a quarter last year - and it's rising fast.
As investment becomes more pan-European and brokers, exchanges and settlement engines develop the infrastructure to support this, operational costs will come down further. Institutions are facing more and more of a choice in where to allocate their funds.
Earlier in the year, we looked at comparative trading costs. We found that in order to transact a typical 10,000 retail trade, for example, it cost:
1.06% to a GERMAN investor purchasing GERMAN shares
1.13% to a UK investor purchasing GERMAN shares
1.44% to a UK investor purchasing UK shares
- 0.94% without stamp duty
With stamp duty attached, it's actually more expensive to trade