Give Scotland tax free status says LSE chief

Published on Saturday 14 November 2009 12:09

THE head of the London Stock Exchange has called for Scotland to become a tax-free zone for investors wanting to fund start-up companies.

Xavier Rolet, who took over as chief executive in the summer, has also suggested the creation of an innovation fund of up to 300 million, financed by the banks.

Rolet, speaking exclusively to Scotland on Sunday, outlined the measures as part of an overhaul of the tax system that he wants Britain to introduce in order to stimulate growth.

Britain, he said, suffered from a Europe-wide failure to properly invest in ideas and the development of small companies. Politicians were "too focused on job losses rather than job creation".

He said: "The financial services industry does not have a well developed mechanism to fund start-ups. It is the number one cause of unemployment in Europe.

"If you invest in debt you get a tax break, so we should not be surprised to be in the middle of a debt-induced crisis."

In contrast, those who invested in equity are penalised by the tax system, he said. "We have to radically rethink the tax code to shift the burden away from equities."

Rolet held a series of meetings with the finance community in Edinburgh on Friday to discuss these issues. The LSE has campaigned for the repeal of stamp duty on equities but Rolet wants the UK to go further by discriminating in favour of investors who want to support early-stage companies. He wants restrictions lifted on venture capital trusts, allowing them to invest more and to trade in the secondary market.

He said radical changes were needed to encourage the growth of new businesses.

"Perhaps Scotland should be a tax-free zone for funds dedicated to providing seed capital to early-stage companies," he said. "What are you losing by doing this, because today it is not happening?

"The UK government has an innovation fund but it is not enough. I would ask the big banks to create a fund, to each put 100m into it. What is 100m to Royal Bank of Scotland these days? It is not even a comma in its accounts."

Rolet said the UK still led Europe in technology and science but ideas were not receiving sufficient funds because the tax system penalises investment.

"You have to link innovation, investors and academics with tax breaks, and first you have to remove the tax penalties on equities," he said.

In February the LSE will launch an electronic retail bond market allowing consumers to buy and sell corporate bonds through their broker.

He declined to comment on the LSE's takeover talks with the alternative trading platform Turquoise, which was launched by investors who were unhappy at the LSE's high fees. Rolet took early action to reduce costs which also led to 133 job losses.

He said the next few years would see further consolidation among exchanges, with possibly four or five offering global trading services.