Europe’s asset managers warn against FTT effects

European institutional investors have warned that a regional financial transactions tax could deter them from investing in fast-growing companies.

According to a report in the Financial Times, Europe’s largest fund managers among which Allianz Global Investors, Fidelity and APG Asset warned policymakers over plans by 11 eurozone countries to introduce a tax on cash and derivatives transactions.

Eleven eurozone countries plan to introduce a transaction tax from January 2014, imposed on stocks, bonds, derivatives, repurchase agreements (repos) and securities lending with trades anywhere in the world linked to securities.

The bloc’s European Commission has drafted rules to implement the tax to raise up to €35bn (£29.7bn) annually

According to Neil Dwane, chief investment officer at Allianz Global Investors, the levy would raise the amount companies pay to raise money in the capital markets.

He told the FT: “We might look at some of the investments we own and sit there thinking, if they [European companies] are going to become at a global competitive pricing disadvantage . . . or access-to-capital disadvantage to their peers, one would have to question whether you want to own them rather than their global competition,” he said.

Investment managers join the broader financial services to suggest that the proposal will damage long-term investors.

The International Banking Federation recently warned of the “cascade effect” of the proposed levy on itizens and businesses of all sizes and from all sectors.

In a letter, the IBS warned that the “naive” new charge could be counter-productive, reducing tax receipts and making it harder for Europe’s ailing economies to prop up their public finances with borrowing from financial markets.

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