Editing Tobin tax (section)

===British stock transaction tax (Stamp Duty)===
{{See also|Stamp duty in the United Kingdom#Stamp duty reserve tax|l1=Stamp Duty Reserve Tax}}

An existing example of a [[Financial transaction tax|Financial Transaction Tax]] (FTT) is [[Stamp duty in the United Kingdom#Stamp duty reserve tax|Stamp Duty Reserve Tax (SDRT)]] and [[stamp duty]].<ref>Stamp duty applies to transfers of [[Stock certificate|certificated stock]].  SDRT is a broadly equivalent tax on the transfers of uncertificated stock.</ref> Stamp duty was introduced as an [[ad valorem]] tax on share purchases in 1808,<ref>{{cite web|title=Stamp Taxes Manual|publisher=HM Revenue and Customs|url=http://www.hmrc.gov.uk/so/manual.pdf|access-date=2011-11-06|archive-url=https://web.archive.org/web/20120307090436/http://www.hmrc.gov.uk/so/manual.pdf|archive-date=2012-03-07|url-status=live}} paras 1.34 to 1.40</ref> preceding by over 150 years the Tobin tax on currency transactions.  Changes were made in 1963.<ref name="Oxera">{{cite web|url=http://www.oxera.com/main.aspx?id=5938|title=The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach|author=OXERA|date=May 2007|publisher=Oxera Consulting Ltd|access-date=2010-03-04|url-status=dead|archive-url=https://web.archive.org/web/20120220065121/http://www.oxera.com/main.aspx?id=5938|archive-date=2012-02-20}}</ref>  In 1963 the rate of the UK Stamp Duty was 2%, subsequently fluctuating between 1% and 2%, until a process of its gradual reduction started in 1984, when the rate was halved, first from 2% to 1%, and then once again in 1986 from 1% to the current level of 0.5%.<ref name="Oxera" />

The changes in Stamp Duty rates in 1974, 1984, and 1986 provided researchers with "natural experiments", allowing them to measure the impact of transaction taxes on market volume, volatility, returns, and valuations of UK companies listed on the [[London Stock Exchange]]. Jackson and O'Donnel (1985), using UK quarterly data, found that the 1% cut in the Stamp Duty in April 1984 from 2% to 1% lead to a "dramatic 70% increase in equity turnover".<ref>Jackson, P. and A. O’Donnell, 1985. The effects of stamp duty on equity transactions and prices in the UK Stock Exchange. Bank of England Discussion Paper No. 25.</ref> Analyzing all three Stamp Duty rate changes, Saporta and Kan (1997) found that the announcements of tax rate increases (decreases) were followed by negative (positive) returns, but even though these results were statistically significant, they were likely to be influenced by other factors, because the announcements were made on [[Budget Day]]s.<ref>{{cite journal| last1=Saporta| first1=Victoria| last2=Kan| first2=Kamhon| doi=10.2139/ssrn.93656| title=The Effects of Stamp Duty on the Level and Volatility of Equity Prices| year=1998|ssrn= 93656 | s2cid=153211344}}</ref> Bond et al. (2005) confirmed the findings of previous studies, noting also that the impact of the announced tax rate cuts was more beneficial (increasing market value more significantly) in case of larger firms, which had higher turnover, and were therefore more affected by the transaction tax than stocks of smaller companies, less frequently traded.<ref name="Bond2005">{{cite journal |doi= 10.1628/001522105774979010 |last1= Bond |first1= Steve |first2= Mike |last2= Hawkins |first3= Alexander |last3= Klemm |year= 2005 |title= Stamp Duty on Shares and Its Effect on Share Prices |journal= Public Finance Analysis |volume= 61 |issue= 3 |pages= 275–298 |url= https://ideas.repec.org/a/mhr/finarc/urnsici0015-2218%28200511%29613_275sdosai_2.0.tx_2-v.html |citeseerx= 10.1.1.573.9479 |access-date= 2015-03-21 |archive-url= https://web.archive.org/web/20150402170449/https://ideas.repec.org/a/mhr/finarc/urnsici0015-2218%28200511%29613_275sdosai_2.0.tx_2-v.html |archive-date= 2015-04-02 |url-status= live }}</ref>

Because the UK tax code provides exemptions from the Stamp Duty Reserve Tax for all financial intermediaries, including  [[market maker]]s, [[investment bank]]s and other members of the LSE,<ref>{{cite web |url=http://www.hmrc.gov.uk/so/manual.pdf |title=HMRC Stamp Taxes Manual |pages=8, 11 |access-date=2010-01-04 |archive-url=https://web.archive.org/web/20120307090436/http://www.hmrc.gov.uk/so/manual.pdf |archive-date=2012-03-07 |url-status=live }}</ref> and due to the strong growth of the [[contract for difference]] (CFD) industry, which provides UK investors with untaxed substitutes for LSE  stocks, according to the Oxera (2007) report,<ref name="Oxera" /> more than 70% percent of the total UK stock market volume, including the entire institutional volume remained (in 2005) exempt from the Stamp Duty, in contrast to the common perception of this tax as a "tax on bank transactions" or a "tax on speculation". On the other hand, as much as 40% of the Stamp Duty revenues come from taxing foreign residents, because the tax is "chargeable whether the transaction takes place in the UK or overseas, and whether either party is resident in the UK or not."<ref name="Bond2005" />