Analysis by the European Fund and Asset Management Association (EFAMA) highlights that the public does not appreciate what the EFAMA describes as "the very significant cost impact that the Financial Transaction Tax (FTT) would have on the long-term savings of EU citizens."
The EFAMA estimates that had the tax been applied from the start of 2011, the annual total would have reached €38bn. This sum would have been made up by investors paying €15bn on the sales and redemptions of UCITS shares/units, and UCITS fund managers paying €23bn on the sales and purchases of securities.
The consequences of such a tax, predicts the EFAMA, would put many money market funds out of business - who would pay 67% of the tax - and reduce the overall attractiveness of long term savings in equity, bond and balanced funds as well.
Such a loss would in turn reduce an important source of long-term financing for the European economy and cause retail and institutional investors to switch their savings away from UCITS and towards savings deposits and life insurance products that are not covered by the FTT.
The EFAMA is asking the EC to re-examine its proposal in light of its original goal as it fears the financial scale of the FTT charge would lead to a shift of business away from funds in Europe.
Peter de Proft, Director General of EFAMA, says, “EFAMA hopes that its analysis will help increase public awareness of the extremely detrimental impact that the proposed FTT would have on the UCITS industry, its clients and the European economy.”
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Failure to engage