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Econ committee calls for wider and tougher tax on transactions

The European parliament’s economic and monetary affairs committee says a financial transaction tax should affect more trades, be harder to avoid and be implemented even if not all of the EU’s 27 member states agree to it.

In September, the European Commission proposed imposing a tax of 0.1 per cent on bonds and share trades and a tax of 0.01 per cent on derivatives trades.

Under the commission’s proposed residency principle, trades where one involved party is based within the FTT zone would be affected.

In text agreed by the Econ committee last week, it calls for an “issuance principle” so trades of a security issued within the FTT zone would be subject to the levy, even if it is traded by firms based outside of it. The committee also wants payment of the tax linked to the acquisition of legal ownership to make it harder to avoid in a similar way to the UK’s stamp duty.

The text says the directive “seems suitable” for implementation within “a group of member states including but not limited to eurozone member states” but warns doing so must not “negatively affect the functioning of the internal market”.

Concerns have been raised that the tax would hit pension funds and the Econ committee is calling for pension fund transactions to be exempt from the levy.

The Econ committee’s text must be ratified by the EP before it becomes its final position.

Giving evidence to the Treasury select sub-committee last week, Debt Management Office chief executive Robert Stheeman described the FTT as “potentially alarming”. He said: “Something that undermines liquidity must be a concern.”


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