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Comment:EU announces financial transactions tax. Major threat to the City or a damp squib?
The European Commission has formally proposed a new Financial Transaction Tax (FTT) for all EU Member States.
If adopted, the new tax will come into force on 1st January 2014 and be levied at a rate of 0.1 per cent on all transactions in financial instruments (shares, bonds etc.) between financial institutions (such as banks and investment firms) when at least one party is based in the EU. Derivative contracts (options, swaps and the like) will be subject to a rate of 0.01 per cent. The issue of shares and bonds by companies into the primary market will not be caught and it would appear that currency transactions will also escape.
For more information, click here.
The UK is firmly opposed to the plans unless an FTT is adopted by other financial centres. The question is whether the UK will be able to withstand the mounting political pressure in the EU in favour of a transaction tax.
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28 September 2011
Author: Ashley Greenbank
