The FTT could leave major banks, its main target, relatively unscathed while less nimble smaller trading houses, pension funds and asset managers bear the brunt.
Bankers and finance industry experts are sceptical about a tax that will not be imposed even in all 17 eurozone members, let alone in Europe's biggest financial centre, London. "The idea of an FTT just within a small group of countries and leaving out the rest of the world is not the brightest", said Chas Roy-Chowdhury, head of taxation at the ACCA, an international accounting body. "Banks in countries that have adopted the FTT will have the minimum level of transactions and will shift as much as possible to London."
Under a previous proposal, which will be used in designing the tax, the levy would be imposed on both buyers and sellers if either party is in a participating country. But Britain and Switzerland will remain on the outside its scope.
Major banks such as Deutsche Bank, BNP Paribas and Unicredit already have big London legal entities and operations that handle much of their wholesale operations and could shift more to them if it proved cheaper. "This is not a question of evasion. They (banks) have a duty to their customer to ensure they are operating in the most efficient manner", said one financial industry source, declining to be named because of the sensitivity of the topic.
By contrast, smaller operators without an international network would have fewer opportunities, if any, to move their transactions out of the participating countries.
An EU official told Reuters on Wednesday that the European Commission had yet to decide whether the tax would also cover securities issued by a company within a participating country. If this were included, trading houses in Asia and the United States would have to pay a tax on bonds and stocks issued by companies and governments in the participating countries.
Sweden's relatively short experiment with financial transaction taxes in the 1980s shows how they can backfire if they are not implemented universally... Sweden's tax on the purchase or sale of equities and bonds prompted more than half of all Swedish equity trading to move to London by 1990. The volume of bond trading fell by 85 per cent in the first week, and futures and options trading almost disappeared.
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