ICAP Plc, the world’s largest inter-bank broker, said a proposed financial transaction tax in the European Union would hurt the region’s economies.
The rules would raise funding costs for governments and companies, prompt financial activity to move outside of the tax zone and increase systemic risk, ICAP said in a report today.
“The proposed FTT is a misguided policy which would be severely detrimental to both EU economies and businesses,” Michael Spencer, ICAP’s chief executive officer, said in a statement today. “It would severely damage the functioning of debt markets which are essential for governments and companies to raise finance. It would increase both their borrowing and operational costs and lead to a flood of financial activity being moved outside the FTT zone.”
The tax may increase the annual interest cost as much as 8.5 billion euros ($11 billion) for Germany, Italy and France in the first year of implementation, ICAP said, citing an estimate from Bank of America Corp.
The U.K., which doesn’t seek to adopt the plan, will probably be among the biggest generators of revenue and won’t benefit from the tax, ICAP said.
Eleven countries have provisionally agreed to the tax: Austria, Belgium, Estonia, France, Germany, Greece, Portugal, Spain, Italy, Slovakia and Slovenia, ICAP said.