The European Union has moved closer to agreeing a financial transaction tax that will apply to 11 member states including France and Germany but excluding the UK.
French Finance Minister Pierre Moscovici told reporters it will take two years to implement the tax, which he says will bring in billions in state revenues.
There has been the usual flurry of criticism from the finance industry, with many claiming the tax will reduce liquidity in the markets and have knock-on effects in the wider economy, as businesses will find it more costly to do normal hedging transactions.
“When a similar tax was imposed on Sweden in the eighties, there was a reduction in home market liquidity and increased volatility as a result, will we see a similar problem unfold with the current tax?” asks Angela Foyle, tax partner at accountancy BDO.
Others criticised the format of the tax and said that since it will only apply to a select group of nations, it is unlikely to succeed.
The tax approach, as outlined in the press, “is full of potential loopholes and get-arounds and will certainly keep the consulting firms and accountants busy as they try to iron out these inconsistencies”, comments Steve Grob, director of group strategy at trading software firm Fidessa.
“More importantly, it illustrates yet again that regulators acting individually or in cosy clubs will never be able to shoot all the regulatory ducks they are aiming at.”
The comments follow an open letter in December from the European Fund and Asset Management Association (Efama), which claimed the tax would permanently damage the culture of long-term retirement saving in Europe.
However, Algirdas Semet, the European commissioner in charge of tax policy, told reporters: “This is a major milestone in tax history.”
Proponents of the transaction tax say it will help recoup to European taxpayers the cost of expensive bank bailouts, soften the damage of painful austerity measures and may make financial markets more stable by reducing speculation.
©2013 funds europe