Brussels, 22/04/2013 (Agence Europe) - Opposition to and doubts about the practical details of the financial transactions tax (FTT) to be introduced by eleven EU countries through enhanced cooperation, is growing, even among its supporters.
Last week, the United Kingdom, the main opponent to the FTT in Europe, lodged an appeal with the European Court of Justice against the tax in the form designed by the European Commission for the eleven countries in question (see EUROPE 10786). It stresses the negative impact that the FTT may have in countries that are not part of it, particularly for the City of London. Luxembourg, another country that has not signed up to the tax, shall back the UK's court case, said Luxembourg's Finance Minister Luc Frieden on Monday 22 April because the tax is to be levied on all stages of purchase and sale, combining the principle of the place where the bank processing the deal is located with the country where the security was issued, and will also affect operators outside the eleven countries, pushing up costs and thus encouraging relocation of transactions.
Some countries' initial enthusiasm has cooled off under the influence of impact assessments showing that the urgent design of the FTT, set at 0.1% on shares and bonds and 0.01% on derivatives, will negatively impact on trade in sovereign bonds and could therefore raise the cost of financing a country's debt (see EUROPE 10831). The FTT might raise some €30 billion to €35 billion a year, but the European Commission suggests that at the same time, it could lead to a reduction in EU27 GDP of 0.3% through a 15% fall in the number of deals and a 75% reduction in derivatives deals. Banking circles fear the disappearance of various parts of the market and a number of brokers. (FG/transl.fl)