Proposals for “enhanced cooperation” between EU member states on a new financial transaction tax (FTT) have been tabled by 11 market regulators, according to one panellist at the Risk Management Association's (RMA) conference in Miami last week.
The 11-strong group, which includes France, Germany, Italy, Spain and Belgium, among other EU markets, are considering plans for a tax that would be applicable on acquisitions of equity shares in listed companies headquartered in the EU.
The proposed FTT is closely modelled on the existing Italian and French FTT, which is charged only on regular cash market transactions.
A tax expert speaking at the RMA’s association update panel session noted that it is unclear whether the proposal included a market-making exemption that covered acquisitions of shares hedging derivative positions.
The proposed implementation date is 1 January 2021.
Versions of an EU-wide FTT has been proposed several times since 2010, but concerns around how it would disproportionately impact the securities finance market, among other hurdles, have so far scuppered wide-spread adoption.
In 2018, an FTT was proposed in Spain as a way to help justify a budget plan presented by the Spanish Government to the EU in October 2017. The Spanish Government wished to pursue a deficit reduction of 0.4 percent for 2019 instead of the 0.65 percent suggested by the European Commission.
Speaking to SLT in November 2018 while the Spanish FTT was being debated, Daniel Carpenter, head of regulation at Meritsoft, a regtech service provider, said: “Spain is not the first, and certainly will not be the last country to enforce a tax on financial transactions, they’re merely following the French and Italian authorities lead.”
He added: “As global financial drivers and political pressure mounts, financial institutions can ill afford to be unprepared for the implementation of new taxes on the buying and selling of securities.”
In September, the UK’s Labour party also revived plans for an FTT for that would include over-the-counter trades in foreign exchange, commodities and related derivatives.
Labour’s shadow chancellor of the exchequer John McDonell expressed support for an FTT in response to a report published in May by Intelligence Capital, which called for a move away from ‘fast finance’ which the report’s author, Avinash Persau, described as “fundamentally flawed”.
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