A raft of industry trade associations have rounded on EU policymakers, condemning proposals to move ahead with a highly controversial tax on financial transactions that they warned would hinder Europe's economic recovery, penalise retail investors, and damage businesses.
Following a meeting in Paris to discuss the European sovereign debt crisis, French President Nicolas Sarkozy and German Chancellor Angela Merkel said yesterday that their respective finance ministers will propose a tax on financial transactions in September. The move comes after the European Parliament voted in favour of an FTT earlier this year. But figures from across the financial and securities industries united in their criticism of the proposals.
Dick Saunders, chief executive of the Investment Management Association, said: “It is dishonest and misleading for politicians to represent a financial transactions tax as a way of raising money from the financial services industry. It’s a tax on savings”. Simon Andrews, commodities and prudential regulation manager at the Futures and Options Association, said the tax "could increase systemic risk, contrary to the aims of the G20, as hedging activity will be discouraged”.
But while the European Commission and the European Parliament have made positive noises about the tax, Merkel’s and Sarkozy’s comments are the strongest indication yet that policymakers intend to push ahead with it. It is unclear whether the tax will be ultimately pushed through on a eurozone level or a European Union-wide basis, as one of the principal opponents of the FTT is the UK, which houses the largest financial hub in Europe. An HM Treasury spokesperson said: “The government will continue to engage with its international partners on financial transaction taxes. But any financial transaction tax would have to apply globally – otherwise the transactions covered would simply relocate to countries not applying the tax”.
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