Margareta Pagano: We need equity to become equitable

People who buy shares are taxed more than if they go to the dogs
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The Independent Online

Workers of the world unite. Don't down your tools but buy a slice of the action. There couldn't be a better time to start learning to love equity – owning shares and investing in business – while weaning ourselves off our addiction to debt that has landed us in our present mess.

We are the most personally-indebted country in the Western world and most people have no savings at all. To get out of this crisis, we need radical reforms to revive our economy and create a more equitable society; monopoly capitalism needs to be turned into social capitalism. It is counter-intuitive but with the stock market at rock bottom, this is a great moment for the British worker to swap being a wage slave for owning shares through employee share schemes or investing on the stock market. Taking part in co-operatives or partnerships could be explored too. It's not just serendipity that The John Lewis Partnership, where all staff share in profits and bonuses, is one of our most inspiring, successful companies. How fascinating that one of the bidders trying to rescue Woolworths wants to turn it into an employee-owned business too. The timing is brilliant.

Who knows what businesses might be created over the next few years? Paradoxically, recessions can be exciting for enterprise – companies such as Apple, Microsoft, MySpace and Google were all born during tough times. But if Britain is to take advantage of the economic downturn and to spread wider share ownership, then it must improve incentives to get private investors back into the stock market as well as investing in small business.

Individual investors now own only a seventh of all shares listed on the London stock exchange – lower since the crash – while only one in seven of the workforce owns shares in his or her own company. The London exchange says all the evidence suggests it is the punitive tax system that puts people off, rather than any lack of appetite for shares or fear of the risk in investing, even in the current climate. Investing in equities still shows the best returns of all asset classes in the long-term.

But people who do buy shares are taxed more than if they go to the dogs: earnings on gambling are tax-free. If you buy shares listed on the stock exchange there are four lots of tax which get paid; first there is stamp duty, then the company pays tax on the dividend it pays out, then the person who receives the dividend income pays tax and then, of course, there is capital gains on the sale. No wonder its better going to the races.

Contrast this with Italy, where private investors are treated like rock stars. About 1.3 million Italian families own more than a quarter of all the shares listed on the Borsa Italiana, now part of the London exchange. They pay no stamp duty and only 12.5 per cent on capital gains. There is a payback: there has been less volatility on the Borsa as loyal private investors are less tempted to sell. Small businesses are also treated well; taxes are lower and about 4,000 small private companies make nearly a third of the national wealth.

The Borsa recently held its annual exhibition for small investors in Milan. Officials were nervous that fewer people would turn up this year because of the crash. Their fears were unfounded: about 3,000 people came, 1,000 more than last year. They can see the way ahead. Badgering Britain's MPs for a more Italian approach to investment should be high on our agenda. What have we got to lose? Only our chains.

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