EU Financial Transaction Tax Could Undermine Industry, BBA SaysAmbereen Choudhury
The European Union’s planned tax on financial transactions could undermine efforts by the industry and regulators to make the system more stable, according to the British Bankers’ Association.
Banks in London view the levy as having the potential to “disrupt significantly capital markets and the transmission of liquidity, which support the real economy,” BBA Chairman Nigel Wicks said in a letter to Bank of England Governor Mervyn King published today. Members support a decision by the U.K. to challenge the plan if participating member states “do not make substantial changes,” according to the letter dated May 3.
“The FTT is not a tax on financial institutions but instead the consumers of their services,” the BBA said. “The tax will hurt ‘‘fixed-rate mortgages, utility and fuel bills, food costs and pensions and savings, and in the process have a further dampening effect on economic growth.’’
The EU on Feb. 14 unveiled its proposal for a 0.1 percent levy on stock and bond trades and 0.01 percent on derivatives 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 ($45.9 billion) a year.
The BBA said that in the short term, the ‘‘tax-take could be a multiple’’ of the estimate, ‘‘which would clearly not be sustainable.’’