The Investment Management Association has reiterated warnings that the European Union’s financial transaction tax will impact UK investors, despite not applying directly to the country.
Yesterday, the European Commission published revised proposals for the FTT – also know as the Tobin tax – which is supported by 11 of the EU’s 27 members and designed to encourage more responsible trading activities.
IMA director of authorised funds and tax Julie Patterson says: “The UK is not one of the 11 countries which have signed up to adopt the tax.
“However, UK investors, pensions and funds will suffer the effects of the tax if they invest in securities from those countries, or if they undertake transactions with counterparts in those countries.”
The FTT proposes a minimum tax of 0.1 per cent on transactions on shares, bonds, units of collective investment funds, money market instruments, repurchase agreements and securities lending agreements, and 0.01 per cent on derivatives transactions.
Patterson says: “It is important to ensure that the tax doesn’t hit every transaction multiple times where intermediaries are involved. It is not uncommon for there to be four or more intermediaries involved in a transaction, making what appears on the surface to be a 0.1 per cent tax significantly more substantial.”
According to the commission’s estimates, the tax could raise €31bn a year. The 11 countries that have signed up for the FTT are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.