A ‘Robin Hood' tax on financial transactions will hit pensions and UCITS funds hard, the Investment Management Association (IMA) warns.
The European Commission today agreed to consider a proposal to introduce a tax on financial transactions to raise money to pay back government debt and improve the functioning of markets.
However, such a tax would only hurt savers more, the IMA argues.
"Pension funds could be hit twice by this tax: when the fund manager arranges a transaction on behalf of the fund and when the fund acquires or sells that asset," said Julie Patterson, director at the IMA.
"UCITS investors could be hit three times, as they may also be taxed when they buy units in the fund. As proposed, this would be a tax on savers, not banks.
"Also, the tax will create distortions in the retail marketplace. Insurance-based investment products will not be caught as they are not strictly ‘financial instruments'."
Patterson added the IMA agrees with the European Commission's aim to create incentives for long-term investment, but said a Robin Hood tax will fail to do so.
She said existing stamp duty on funds has already driven many funds away from the UK, and further tax will create distortions between the EU and other financial centres.
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