Tax reforms and the decline of the London stock market: the untold story

Gomtsyan, Suren Gomtsian ORCID: 0000-0002-7531-6187 and Schuster, Edmund-Philipp ORCID: 0000-0002-9355-535X (2024) Tax reforms and the decline of the London stock market: the untold story. European Company and Financial Law Review, 21 (2). 234 - 268. ISSN 1613-2548

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Abstract

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tax treatment of the dividend income of UK pension funds and insurance companies introduced in the early 1970s and repealed in the mid 1990s first contributed to the UK stock market's growth by implicitly subsidising financing via equity and encouraging the flow of the funds of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.

Item Type:	Article
Official URL:	https://www.degruyter.com/journal/key/ecfr/html?la...
Additional Information:	© 2024 Walter de Gruyter GmbH, Berlin/Boston.
Divisions:	Law
Subjects:	H Social Sciences > HG Finance H Social Sciences > HB Economic Theory K Law
Date Deposited:	21 May 2024 09:03
Last Modified:	12 Dec 2024 04:17
URI:	http://eprints.lse.ac.uk/id/eprint/123539

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