The Labour-commissioned report, published today and authored by former Institute of Directors director-general Sir George Cox, suggests major changes to the UK tax regime in order to encourage long-term thinking in British business.
The report follows the Government’s own review into short-termism in the equity markets by economist John Kay, published last year.
Cox’s report states: “Taxation treatment should be changed to attract long-term investors back into the equities market and to incentivise longer-term shareholding. This should encompass both individual shareholders and funds.
“For example, capital gains tax on shares could be tapered, in a series of yearly steps, from a rate of 50 per cent in year one to 10 per cent after year 10.
“Liability for tax on dividends could be reduced, in a series of yearly steps, from the prevailing rate of income tax in year one to 0 per cent after year 10.”
The report also recommends abolishing stamp duty for shares traded in AIM-listed firms to boost the liquidity of the market. The taper for taxation on dividends could be accelerated from 10 years to five years on AIM-listed firms.
It wants to see venture capital trusts and enterprise investment schemes “enhanced”. It suggests the rules banning anyone with a 30 per cent stake in a firm and employees from investing in EIS should be scrapped.
The paper also calls for an end to quarterly reporting and more discussion about long-term strategy in firms’ results, which has been previously backed by leader Ed Miliband. It also calls for up to 30 per cent of executive directors’ pay to be deferred and based on results over five years.
Shadow chancellor Ed Balls says: “Sir George’s report sets out a clear plan for creating that more long-termist economy including radical reforms to executive pay, tougher rules on takeovers and encouraging longer-term shareholding and we will now study his detailed proposals as part of our policy review.”