Brussels, 04/04/2013 (Agence Europe) - Disagreement with the financial transactions tax (FTT) is growing in the financial industry. The FTT is due to be introduced by eleven EU member states on 1 January 2014 (see EUROPE 10786) through the enhanced cooperation mechanism. Industry is unhappy with the cost of the tax for banks and countries, including nations outside the euro, and the danger of businesses relocating to avoid the tax.
According to a report by London Economics, a firm of consultants commissioned by the City of London, the levying of the FTT would force investors to demand higher returns from sovereign bonds, which would in turn increase the cost of lending for countries. The study shows that by levying the tax on stockbrokers, it will create a domino effect that will multiply the tax by 10 to 1% rather than the 0.1% suggested in the European Commission's draft legislation.
In France too, the financial market is preparing to present its grievances to the finance minster. The French banking association is unhappy at the disproportionate cost (equivalent to the total annual turnover of several of its members) of taxing derivatives deals (0.01% is suggested by the Commission), which are used frequently by big French banks. It is claimed by the head of a big bank quoted by French business newspaper Les Echos that the costs would send 60% to 70% of derivatives business out of the eurozone and thus destroy the very business the tax itself is based upon. Similar concerns are voiced by asset and unit trust managers, who slam the hike in management costs for monetary funds due to double taxation (within the funds and when they are sold). They say assets will be sent out of the eleven countries levying the tax to countries like Luxembourg, Ireland and the UK. The UK has conveniently just announced the abolition of stamp duty on transactions by British unit trusts. (FG/transl.fl)