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Ireland: Financial Transaction Tax 'Would Hurt GDP'

27 November 2013   (0 Comments)
Posted by: Author: Nandini Sukumar
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Author: Nandini Sukumar (Irish Independent)

Plans for a tax on financial transactions, long rejected by Ireland, may fail to reduce market risks and could increase household costs, according to a PricewaterhouseCoopers study commissioned by the financial industry.

A financial transaction tax, or FTT, may reduce gross domestic product growth by 0.3pc to 2.4pc, according to the report, which examined published studies on the proposal.

It may also fail to address the market's key sources of systemic risk, such as the interconnectedness of financial institutions, PwC said.

"To think the proposal for an FTT will raise the revenue expected is unreal," said Anthony Belchambers, chief executive officer of the Futures & Options Association. "To imagine there will not be a serious loss of trading volumes depending on the market is unreal, and to suggest that this is a cost only to banks is unreal."

'ADVERSARY'

French President Francois Hollande, who called finance his "greatest adversary" before he won office last year, has since enacted a tax on stock trading. German Chancellor Angela Merkel last year backed a European Commission plan for a broad-based tax on trades in stocks, bonds, derivatives and other assets. Ireland and the UK fought against the tax.

The European Commission has sent an initial proposal for an FTT that would affect all 11 nations of the EU that have agreed to implement it.

The PwC report was commissioned by 27 trade groups, including the FOA, Paris Europlace, the British Bankers Association and the Investment Management Association.

The Commission published an initial proposal for a financial transaction tax in 2011, seeking to curb volatility and make markets safer for investors. The commission said the objectives of the tax are to create "disincentives" for trading when it doesn't make the market more efficient, ensure financial institutions contribute to "covering the costs of the recent crisis" and harmonise indirect tax legislation. (Bloomberg)

This article first appeared in independent.ie.


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