The EC's proposed "new" financial transaction tax (FTT) will reduce the attractiveness of savings and the supply of long-term financing in Europe, particularly in the FTT-zone, according to EFAMA, the European funds association.
The EC’s proposed “new” financial transaction tax (FTT) will reduce the attractiveness of savings and the supply of long-term financing in Europe, particularly in the FTT-zone, according to EFAMA, the European funds association.
European investors and savers face a “very great danger” if the FTT proposed by the European Commission is introduced, said the trade body, which represents 27 member organisations across the region.
If applied at the start of 2011, EFAMA has estimated that the annual total cost of the FTT would have reached €13bn (of which €7.3bn is attributed to the FTT-zone and €5.7bn attributed to countries outside the FTT-zone).
Investors would have paid €4bn on the redemptions of Ucits shares/units, whereas €9bn would have been levied on the sales and purchases of securities by Ucits fund managers.
The actual effect of the tax is likely to be even more severe because the tax actually applies various times to each transaction (the so-called “cascading effect” that could give rise to multiple taxation of up to 10 times), EFAMA noted.
EFAMA director general Peter de Proft (pictured) said the organisation is “extremely concerned about the detrimental impact of the new FTT on investors in funds including retail investors and savers participating in pension plans and the European economy, especially those of Member States within the FTT-zone”.
“EFAMA strongly opposes an FTT which will result in fund investors paying the tax (at least) twice, and which will drastically reduce the attractiveness of saving through funds and pension plans. This would be wholly unjustified in the light of the important social role investment funds play, and the global reputation that Ucits has acquired as a model of excellence in the long-term savings market.”
EFAMA is also concerned about the distortions to the Single Market damaging the competitiveness of the resident financial institutions leading to unjustified delocalisation out of the FTT zone. Implementation will create incentives to relocate asset management activities outside the FTT-zone (causing job losses in the financial sector and therefore negative consequences for the economies of the EU Member States in the FTT-zone).
The FTT will have a highly detrimental impact on a wide range of activities (in particular in the area of money market funds, repos, securities lending). This will reduce liquidity in the financial market and increase the cost of capital for European companies.
“EFAMA requests that the European Commission and/or the Member States forming part of the FTT-zone re-examine this new proposal,” the statement said.