The Business, Innovation and Skills (BIS) select committee is calling on government to consider introducing a financial transactions tax (FTT) as part of moves to implement the recommendations of Professor John Kay’s review on tackling short-termism in equity markets according to the innovative deliverer of innovative accountancy services to small businesses, Harris & Co chartered accountants Northampton.
The option of introducing an FTT does not form part of Kay’s final report but was raised during evidence put before the committee hearings. Attempts by the European Commission to impose a European-wide FTT have been met with strong opposition in the UK, with the Chancellor vowing to block any attempt to impose the controversial tax.
In its report on the outcome of the review, the BIS select committee says the government should commission an impact assessment of the introduction of an FTT at a level which is the average profit made on a high frequency trade in the UK.
It also calls for government to conduct a feasibility study of the proposal to ban any banks which establish branches in offshore centres that do not adhere to the OECD’s white list of financially compliant economies from trading in the UK. This should include an assessment of whether doing so would counter arguments against a domestic FTT being ineffective in the global market.
Adrian Bailey, chair of the BIS committee, said:
‘We found some support for the concept of a FTT, but concerns about the practicality of its implementation. Something being difficult is not sufficient justification for rejecting it out of hand. The government should assess the likely impact of the introduction of a FTT and how obstacles to its implementation can be overcome.’
The committee said the government must be willing to pick up a ‘regulatory stick’ to drive implementation of the Kay Review of UK equity markets and long-term decision making. It wants clear, measureable and achievable targets for implementation of each of Kay’s 17 recommendations published immediately.
‘It is not enough for the government to simply say it supports Kay’s recommendations and then leave it to the industry to change of its own volition. The government must set measurable, accountable targets through which reform can be driven and measured.’
Kay’s review calls for enhancements to the stewardship code, so that it focuses on strategic issues as well as corporate governance. It also wants government to commission a study to set out the impact on the UK of foreign takeovers of British companies over the past 25 years, and to assess the risks and benefits of a policy that differentiates between shareholders and voting rights based on the length of time a share has been held.