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MM Leader: Savers will suffer from this "Robin Hood" tax

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As European politicians, trade unions and charities continue their push for a European financial transaction tax, it is worth remembering that ordinary savers will bear the brunt of this new levy.

Announcing its proposed tax in September, the European Commission suggested individuals and businesses would not be hit by proposals aimed squarely at the financial institutions which helped cause the economic woes spreading across Europe.

However, ordinary investors are likely to be the ones who will principally suffer as a result of the so-called Robin Hood tax through new charges on their pensions and investments.

The planned FTT would hit savers in pension and investment funds multiple times as it would apply on the creation and cancellation of units in collective investment vehicles. As investors are the ones who own the funds, there is no one else to pay the levy.

The Investment Management Association estimates that the majority of FTT costs incurred earlier in the acquisition chain will be passed on to the end-investor either through an adjustment to spread levels or brokerage fees.

Much of the critique of the FTT has focused on the folly of introducing such a tax without a global agreement, with both the Conservatives and Labour more amenable to plans if agreed on a global basis.

But political arguments should be focused on the fact it is a poorly targeted in the first place. A tax on saving will hit ordinary investors who are already suffering the fallout of the financial crisis, rather than the boardrooms of the big banks.

In romantically evoking the scourge of the Sheriff of Nottingham, proponents of this new savings tax have got their symbolism all wrong.

In folk lore, Robin Hood stole from the rich and gave to the poor. His band of merrymen did not roam Sherwood Forest looking to take from individuals and families who were frugally saving for their futures under the direction of foreign powers looking for an easy target to sort out the mess they created.

Strong Week

Well done to the Institute of Financial Planning team and all advisers helping to make this year’s Financial Planning Week a success. They are proving it is possible to get positive industry stories into the consumer press.

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Readers' comments (3)

  • No one has thought this through, and commented in public, but it will affect anyoen using the City for financial services - particularly FX - because charges will be incerase to partially offset increased costs. So who does that include? Well, actually much of the third world.

    So France's efforts to dodge the cost of the grand Euro plan championed by its own citizens, will keep the poor of the world, just a tiny bit poorer. Tres Bon.

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  • if the tax was payable only where firms were dealing on own account (dealing as principal) it would catch the casino bankers speculative transactions but not a genuine buy/sell transaction from the man on the clapham omnibus, as firm would be dealing as agent when trading in this capacity. Simples!

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  • It certainly will tax pensions and savers largely provided for by non banks as well, how does that work. Kick the pensions and savings industry coz the banks and government got it wrong.

    Should this FTT come about I would imagine the wealthy will be able to redirect their funds. That will leave average Joe's little pension pot. That will mean less than expected revenues and so they will raise the rate of the tax to compensate leaving average Joe with not much.

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