The European Union on Feb. 14 unveiled its proposal for a 0.1 percent levy on stock and bond deal trades and 0.01 percent on derivative trades with ties to participating countries.
The measure exempts primary offerings of government bonds, though includes secondary market trades. The EU estimates the move could raise as much as 35 billion euros ($45 billion) a year. To become law, the proposal has to be approved by all the nations that agree to participate, which currently stands at 11 countries including Germany, Spain and France.
The effective tax rate would be 10 times the EU levy on bonds because the tax would be repeatedly charged at each step in the settlement of a trade, the report said. That “cascade effect” could cripple trading in the debt-securities markets, London economists say.
To stop traders from escaping the levy by operating outside the tax’s zone, the EU plan invokes “residence” and “issuance” ties to firms in participating nations. That means, for example, that a French bond traded in London would still be affected.
Approximately half of European investment-banking activity is conducted through London and British financial firms and it has generated almost 12 percent of the country’s tax revenue from 2011 to 2012, according to TheCityUK, a British bank lobbying group
The new EU Transaction Tax is seen by many Governments and central banks in Europe as a major first step- in curbing some of the financial industry's speculative practices which resulted in one of the world's worst recessions ever experienced.
EU-Digest
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