IMN: FTT won’t let beneficial owners be
18 September 2014 London
Image: Shutterstock
The EU 11 will come to a conclusion over the Financial Transaction Tax (FTT) before the end of the year, according to John Billige of State Street.
Billige was speaking at the European Beneficial Owners’ Securities Lending Conference in London in an effort to minimise speculation over the FTT.
He said that there is heated discussion among the EU 11—the EU countries that used enhanced cooperation to push through plans for an FTT in 2013—about when and how tax revenue is distributed. He expects a conclusion talks before the end of Q4.
“The directive itself hasn’t changed,” he explained, but the EU 11 is undecided on the so-called establishment and issuance principles, with the former coming first and the latter’s extra-territorial effect “clearing up”, and possibly getting in the way of distribution.
“I can’t see how they’re going to come up with something sensible,” added Billige.
An FTT on equities is due to launch in January 2016, while member states will be able to decide themselves when they introduce a tax on other instruments, such as fixed income or derivatives, before coming together again to consolidate their efforts.
This will create an imperfect tax, said Billige, and would not be good for securities finance, which is yet to be exempted.
There is no talk of exempting temporary transfers from the FTT, he explained, although repo transactions may be protected eventually.
This will see a 10 basis point charge levied on each lend and return, explained Billige, which will inevitably be passed on to beneficial owners because “banks wouldn’t wear it”.
Billige was speaking at the European Beneficial Owners’ Securities Lending Conference in London in an effort to minimise speculation over the FTT.
He said that there is heated discussion among the EU 11—the EU countries that used enhanced cooperation to push through plans for an FTT in 2013—about when and how tax revenue is distributed. He expects a conclusion talks before the end of Q4.
“The directive itself hasn’t changed,” he explained, but the EU 11 is undecided on the so-called establishment and issuance principles, with the former coming first and the latter’s extra-territorial effect “clearing up”, and possibly getting in the way of distribution.
“I can’t see how they’re going to come up with something sensible,” added Billige.
An FTT on equities is due to launch in January 2016, while member states will be able to decide themselves when they introduce a tax on other instruments, such as fixed income or derivatives, before coming together again to consolidate their efforts.
This will create an imperfect tax, said Billige, and would not be good for securities finance, which is yet to be exempted.
There is no talk of exempting temporary transfers from the FTT, he explained, although repo transactions may be protected eventually.
This will see a 10 basis point charge levied on each lend and return, explained Billige, which will inevitably be passed on to beneficial owners because “banks wouldn’t wear it”.
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