UK IMA criticises FTT adoption by EC for 11 member states

The adoption of a Financial Transaction Tax (FTT) across 11 EU member states, announced today by the European Commission, has been criticised by the UK’s Investment Management Association (IMA).

The FTT will not apply directly in the UK, as it is one of the non-signatory states to the deal.

However, under the enhanced co-operation rules governing the EU, it is possible for the 11 member states (Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia) to apply the tax in a way that will still end up costing UK investors, the IMA warns.

Julie Patterson, IMA director of Authorised Funds and Tax, said: “UK investors, pensions and funds will suffer the effects of the tax if they invest in securities from those countries, or if they undertake transactions with counterparts in those countries.”

“Moreover, unlike stamp duty on UK equities, the tax will apply twice to every transaction – for the seller and for the buyer.”

“It is important to ensure that the tax doesn’t hit every transaction multiple times where intermediaries are involved. It is not uncommon for there to be four or more intermediaries involved in a transaction, making what appears on the surface to be a 0.1% tax significantly more substantial.”

Details on the EC latest announcement on the FTT are published here – – including additional information on revenue estimates – €57bn annually from the industry – as well as estimates on the impact the FTT will have no occupational pensions.

In one of the attached documents to its decision, the EC said that: “The impact of an FTT on pension funds will depend on both the asset allocation (portfolio)
and on the investment strategy (more frequent trading vs. less frequent trading, for example).”

“If one looks at the asset allocation in selected pension funds (see figure 1), not all these assets represent taxable financial instruments as defined in the proposal, neither do all the transactions. As an illustration, cash and deposits and other assets (including derivatives, but also investment in real estate and others) make up for 22% (or almost EUR 190bn) in the Netherlands (over 4% in cash and deposits) and 34% in Bulgaria (over 28% in cash and deposits).”

“Also, a distinction between defined-benefit schemes (DB) and defined-contribution schemes (DC) looks meaningful, as both will have to hedge different risks differently. According to EIOPA data, loan deposits and other assets have a lower weight in the total portfolio in the case of defined-benefit (DB) schemes, whilst these types of assets are better represented in the total portfolio of defined-contribution (DC) schemes, with around 40% in Spain, Italy, Bulgaria and Latvia.”

Further information on the FTT and its implementation is also explained in a video interview of Manfred Bergmann, director for Indirect Taxation and Tax Administration, European Commission, available here:


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