6 January 2017 – The European Investors’ Association has noted with great concern that ten EU Member States are pushing ahead with their enhanced cooperation in the area of the Financial Transaction Tax (FTT). Introduction of a FTT would burden investors in Europe with the negative effects of a tax which is unjust, counterproductive and therefore utterly unacceptable.
The participating countries have agreed on a common position regarding the ‘core engine’ of a FTT. The ECOFIN Council took note of the state of play and discussed the next steps envisaged during its meeting on December 5th 2016.
Investors will pay the price
European Investors is adamantly opposed to the introduction of a FTT. We are convinced that such a tax measure will miss its goals, shall damage the position of European stock markets and will be very harmful to investors’ interests and the growth potential of European economies, some of them still in a fragile state of recovery. Furthermore, the introduction of a FTT will unnecessarily deepen the divisions within the Capital Markets Union. And most importantly, European Investors is worried that financial institutions will pass on the FTT-related costs to the consumer. In effect, professional investors and SME’s will pick up the tab.
Therefore, European Investors has requested the Finance Ministers of Slovenia, Slovakia and Belgium – Member States whose ongoing participation is in doubt – to protect the interests of investors in Europa by reconsidering their participation and lend no further support to the upcoming negotiations.
Just ask the Swedish
Introduction of a FTT has already shown its destructive effects in the past.
Sweden was confronted with these effects when it introduced its own financial transaction tax in the 1980s. As a result, Swedish share prices plunged, trading volumes on the Stockholm stock exchange were distorted and investors massively fled the tax regime. A staggering 90% of traders in bonds, equities and derivatives moved to London. In 1991, the Swedish government returned on its tracks and abolished the bad functioning tax.
Anders Borg, the former Swedish Minister of Finance (2006-2014) already warned his former colleagues in an interview with the BBC. “The impact was basically that we did not get any tax revenue. It brought in very little tax money will moving most of the businesses outside of Sweden. We abandoned (the tax) because it was a very, very bad functioning tax. I hope (policymakers) realise they might be losing out themselves.”
European Investors would like to spare investors in Europe from such an unwise experiment.
The wise men from Tallinn
The current FTT-group consists of Germany, France, Italy, Portugal, Belgium, Greece, Austria, Spain, Slovakia and Slovenia.
At the start of the enhanced cooperation procedure, Estonia was part of the group as well but the Baltic country retracted its support in 2015. Its government felt that the benefits of a FTT would not outweigh the (economic) costs.
Moreover, discussions on the FTT led to unrest in the Belgian government in December 2016.