View more on these topics

Lords attack FTT as unworkable and damaging to growth

A financial transaction tax is unworkable, would push firms to relocate outside the EU and could undermine economic growth, according to a report from a House of Lords committee.

The European Commission’s proposal, announced in September, would see a 0.1 per cent charge on stock and bond trading and 0.01 per cent on derivatives contracts.

The House of Lords European scrutiny committee has been running an inquiry into the FTT. Its report, published today, says: “We have been disappointed with what we have discovered. We have found the Commission’s proposed model wanting in many respects.”

It says objectives for the tax put forward by the Commission are unlikely to be achieved. Introducing the tax in the EU is unlikely to lead to it being implemented globally and political difficulties mean using the revenue to fund EU coffers is “contentious to say the least”.

The UK refuses to back an EU wide FTT, but negotiations in Europe over how to increase taxation on financial services are ongoing. Talks could see only some countries adopt the FTT or a new approach put forward in its place. The committee says any such tax would have considerable implications for the UK and calls on the Government to “redouble its efforts” in ensuring the UK influences the debate.

The FTT’s charges would be levied in the country in which the institution is based regardless of where the actual transaction takes place, this is known as the ’residency principle’. But, the committee says defining residency would be difficult and brands the measure “wholly impractical and unworkable”.

European Commissioner for taxation Agirdas Semeta argued in a committee hearing in February that the residency principle would reduce the likelihood of firms relocating. The report says: “Should the Commission implement its FTT proposal in the EU alone, financial institutions would relocate outside of the EU.

The report adds that the Commission’s estimate that the tax could hit growth in the long-term by 0.53 per year is “concerning”. It says: “At a time of ongoing financial crisis and at best fragile economic growth across the entire EU, we consider a new tax which could have substantial detrimental impact on EU GDP should be resisted.”


Deals on wheels

We are currently receiving a higher than expected volume of enquiries and apologise for the delay caused. Your application is important to us. We hope to resume normal service soon. Sound familiar? Anyone who has phoned a call centre anywhere from Glasgow to Mumbai will recognise the frustration that comes with automated responses such as […]


IFS: Stamp duty changes highlight need for property tax rethink

The Institute for Fiscal Studies says the changes to stamp duty announced in the Budget appear “unpremeditated” and bolster the case for wholesale reform of property taxation. Last week, Chancellor George Osborne announced a new 7 per cent stamp duty band for properties worth over £2m and a 15 per cent band for any property […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm