Green Light for EU Transaction Tax Means Uncertainity for Multinationals
The article last Tuesday focusing on the recent approval by 11 EU countries of a financial transaction tax ("Financial Transaction Tax gains approval", October 9) failed to highlight that, whilst many supporters will view this as a major coup, multinational companies - specifically those in the financial services arena - will view this with concern, not only due to the lack of clarity on implementation, but also of the unlevel playing field this will create for trading across the continent.
As things stand there is a striking lack of guidance on both the rate and scope of the new levy, leaving the financial sector in the dark as to how they might structure their equity, bond and derivative trading operations going forward.
The implementation of the tax will also result in a trading dichotomy across Europe. Financial hubs such as Frankfurt, Paris and Madrid will be affected by the tax, with other centres of trading, including London, seemingly gaining a significant advantage through their resilience in not signing up to the agreement.
What is clear is that implementation, in whatever form it finally takes, could have serious consequences for the overall competitiveness of Europe as a global hub for financial services. The lack of consistency in the taxation of trading could in the extreme lead multinationals to avoid the continent altogether, instead looking to the US or Asia.
Frederic Donnedieu de Vabres, Chairman of Taxand
First published in the Financial Times, 18 October 2012
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