The draft Directive from the European Commission, which sets out the legal framework for the introduction of a financial transaction tax (FTT) in 11 EU Member States, will have a negative effect on insurers, their customers and the EU economy.
The Directive, if adopted, would levy a tax on all transactions on financial instruments between financial institutions when at least one party is located in one of the states that intend to participate in an FTT under “enhanced cooperation”.
The current broad scope of the proposal means that it includes (re)insurance undertakings, although it excludes the conclusion of insurance contracts. “As it stands, the draft Directive will therefore have a number of damaging consequences for insurers and their customers”, said Michaela Koller, director general of Insurance Europe.
Insurance customers buying retirement or long-term savings products will inevitably also be affected by an FTT. This was recognised by the International Monetary Fund in its June 2010 report to the G20, “A fair and substantial contribution by the financial sector”, which clearly concluded: “The real burden [of an FTT] may fall largely on final consumers … (both businesses and individuals) in the form of reduced returns to saving, higher costs of borrowing and/or increases in the final commodity prices”.
“It is disappointing that the EC is proposing a tax that will harm the retirement products provided by insurers, particularly in an already tough low-interest rate environment and at a time when people should really be being encouraged to save for their retirement”, said Koller.
Press release
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