Tax Reforms and the Decline of the London Stock Market: The Untold Story

IF 1.3 Q1 LAW

European Company and Financial Law Review Pub Date : 2024-09-18 DOI:10.1515/ecfr-2024-0008

Suren Gomtsian, Edmund Schuster

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Abstract

234 Various reasons have been put forward for the declining global relevance of the London equity market. Reform proposals and changes already implemented target some of the major problems identified as reasons for the stock market’s decline. Surprisingly, tax related explanations for the current state of the UK stock market are largely absent from the discourse. This paper argues that the preferential tax treatment of the dividend income of UK pension funds and insurance companies introduced in the early 1970s and repealed in the mid 1990s first contributed to the UK stock market’s growth by implicitly subsidising financing via equity and encouraging the flow of the funds of these investors into the market, and subsequently led to the market’s decline as a result of the outflow of the funds of the two major classes of institutional investors: UK pension funds and insurance companies. The key implication of this argument is that omitting tax as a major factor in the decline of the UK stock market risks ending up with reforms that can, at best, do little to change the current situation.

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税制改革与伦敦股市的衰落：不为人知的故事

234 伦敦股票市场的全球相关性下降有各种原因。改革建议和已实施的变革针对的是一些被认为是股市下滑原因的主要问题。令人惊讶的是，有关英国股票市场现状的讨论基本上没有涉及与税收相关的解释。本文认为，对英国养老基金和保险公司股息收入的税收优惠政策于 20 世纪 70 年代初开始实行，并于 20 世纪 90 年代中期被废除，该政策首先通过暗中补贴股票融资和鼓励这些投资者的资金流入市场，促进了英国股市的增长，随后由于两大类机构投资者的资金外流，导致了股市的下跌：英国养老基金和保险公司。这一论点的主要含义是，如果忽略税收这一导致英国股市下跌的主要因素，那么改革的结果充其量也只能是无助于改变当前的状况。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

European Company and Financial Law Review LAW-

CiteScore

1.00

自引率

16.70%

发文量

期刊介绍： In legislation and in case law, European law has become a steadily more dominant factor in determining national European company laws. The “European Company”, the forthcoming “European Private Company” as well as the Regulation on the Application of International Financial Reporting Standards (“IFRS Regulation”) have accelerated this development even more. The discussion, however, is still mired in individual nations. This is true for the academic field and – even still – for many practitioners. The journal intends to overcome this handicap by sparking a debate across Europe on drafting and application of European company law. It integrates the European company law component previously published as part of the Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR), on of the leading German law reviews specialized in the field of company and capital market law. It aims at universities, law makers on both the European and national levels, courts, lawyers, banks and other financial service institutions, in house counsels, accountants and notaries who draft or work with European company law. The journal focuses on all areas of European company law and the financing of companies and business entities. This includes the law of capital markets as well as the law of accounting and auditing and company law related issues of insolvency law. Finally it serves as a platform for the discussion of theoretical questions such as the economic analysis of company law. It consists of articles and case notes on both decisions of the European courts as well as of national courts insofar as they have implications on European company law.