Brussels, 17/04/2013 (Agence Europe) - An offensive by banks against the financial transactions tax (FTT) unveiled by the European Commission for introduction on 1 January 2015 by eleven EU member states using the enhanced cooperation mechanism is continuing.
Following on from the European Bank Federation (EBF) and the City of London, both of which have slammed the negative impact of the tax even outside the eleven participating countries due to extra cost to businesses and governments (see EUROPE 10823), six French professional associations have weighed in, expressing their concerns in a letter sent on 15 April to French Finance Minister Pierre Moscovici.
The six associations criticise the huge costs of €70 billion a year to be borne by France out of the total costs of €150 billion for the eleven countries, although the Commission estimates the impact in France will be €7 billion (of a total €34 billion). The difference is due to the calculation methods. French banks work out the tax at 0.1% of the purchase of bonds and shares and 0.01% on derivatives deals for the volume of transactions that occurred in 2012, whereas they say the Commission calculated the income that would be raised by the tax and then reduced it by 80%, explains an article in La Tribune. French banks say the tax will be applied to the range of dealers, including brokers, at every stage of a deal and thus a single transaction could be taxed ten times, with the same broker paying the tax twice - once when buying and once when selling.
French banks fear that the increased costs would lead to lower trading, particularly for high-speed trading (and such a reduction is one of the aims of the tax), along with fewer derivatives deals (the most frequent type of trade, that could supply €21 billion of the predicted €34 billion tax income), which would lead to lower income. Reducing the volume of transactions below a certain level would make them unprofitable and therefore lead to them being shifted to somewhere else in the world. Another criticism is that the increased cost would encourage investors to demand higher yields, which could push up the cost of sovereign bonds and company loans. (FG/transl.fl)