Ireland: Financial Transaction Tax 'Would Hurt GDP'
27 November 2013
Posted by: Author: Nandini Sukumar
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.
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."
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 European Commission has sent an initial proposal for
an FTT that would affect all 11 nations of the EU that have agreed to
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.