The European Fund and Asset Management Association (EFAMA) says the economic cost of a financial transactions tax would, in practice, be borne by end consumers throughout Europe including individual savers and those participating in pension plans.
According to EFAMA, the impact of the proposed financial transaction tax on the long term savings market would be significant, not only because the proposed headline rates are relatively high, but also because the proposal, as currently drafted, would give rise to multiple taxation.
In the case of investment funds, for example, the charge to financial transaction tax would apply at fund level, through transactions within portfolios, and on investors when buying funds.
In addition, the use of financial intermediaries to distribute funds means that the purchase of shares or units by a single investor may give rise to multiple transactions down the distribution chain, all of which would be subject to financial transaction tax.
EFAMA is also concerned that there is no guarantee that the proposed financial transaction tax would result in significant net revenues, in spite of the fact that it would give rise to a significant economic cost for consumers.
This is partly because the fundamental impact of the proposed financial transaction tax would be to dampen end-user appetite for transactions and encourage relocation of operations outside the EU, or eurozone if a solely eurozone-wide approach to financial transaction taxes is adopted. This would reduce not only financial transaction tax revenue, but also direct tax revenue, observes EFAMA.
“The bottom line is that it would mean citizens having to save a larger part of their earnings, retire at a later age, or face a significantly reduced pension in retirement," says Peter de Proft, Director General of EFAMA.
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