Financial transaction tax is unfair unless stamp duty reserve is scrapped, says AITC
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Association of Investment Companies director general Ian Sayers says the financial transaction tax should only be introduced in the UK at the expense of the existing stamp duty reserve tax.
Last week, the European Commission proposed the tax as a means of ensuring the financial sector makes a fair contribution to “the cost of rebuilding Europe’s economies and bolstering public finances”.
The proposal would mean a 0.1 per cent tax on trading of stocks and bonds, with a 0.01 per cent rate for derivatives contracts. Those minimum rates would apply throughout the 27 EU states.
Sayers feels the tax would be unfair in the UK, given that the existing SDRT affects only UK-authorised funds.
SDRT is payable on buying unit trusts or shares in open-ended investment companies, although how it is paid differs from shares.
Unit trusts and Oeics are dealt with under special rules. When you buy units from a fund manager you are not charged SDRT but when units are surrendered, the fund manager is charged SDRT, the cost of which is usually passed on to investors through management charges.
Sayers says: “If the UK is paying a big chunk of this new tax then it is only fair that the existing tax is removed, as it leaves many investors exposed to excessive tax charges.”
The UK has already said it will resist the tax, which it is estimated will raise £50bn a year from 2014, unless it is administered globally. The tax must be approved by the UK to be implemented across the EU.
IMA director of authorised funds and tax Julie Patterson says pension and Ucits fund investors could be taxed more than once under the proposals.
She says: “Pension funds could be hit twice by this tax, once when the fund manager arranges a transaction on behalf of the fund and again when the fund acquires or sells that asset.
“Ucits investors could be hit three times, as they may also be taxed when they buy units in the fund.”
Martin Currie head of product development Toby Hogbin says: “It would add an additional layer of complexity and confusion for investors.”
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