The Global Federation of Insurance Associations has concerns over the extraterritorial reach of the proposed FTT and its negative impact on the insurance sector globally.
General remarks
GFIA's overarching concern is that the introduction of the proposed FTT would have a significant impact on economic growth and therefore undermine countries’ efforts to sustain economic recovery and ensure job creation. Specifically, the proposed FTT would result in significantly less liquid financial markets and higher costs on financial intermediaries, which, in turn, would increase the cost of funding of companies and therefore negatively affect their future levels of investment in the economy.
Moreover, GFIA believes that, even if insurance contracts are excluded from the scope, the proposed FTT would have a significant adverse impact on insurance companies and their customers. In particular, by taxing the transactions of all types of financial instruments, irrespective of whether they are conducted for a speculative or investment purpose, the Proposal would significantly increase the cost of policyholder protection (as the price of an insurance policy is dependent on the investment return) and would inevitably reduce the return offered on long-term retirement products and increase the cost of life insurance products provided by insurance companies. This in turn could have consequences for the economy, since insurance companies are important long-term investors, and have a key role to play in contributing to economic growth. GFIA is very concerned that ultimately, the substantial cost of an EU FTT would be paid by consumers, as outlined by the International Monetary Fund in its June 2010 report “A fair and substantial contribution by the financial sector”.
Therefore, GFIA believes that the Proposal is not only highly likely to hamper the economy, but would also give rise to significant costs on long term savings which would, in reality, be borne by consumers.
The attached Annex outlines in more detail the negative impacts of the proposed FTT on insurers and their products, particularly retirement products.
Conclusion
The proposed FTT would have an adverse impact on insurers and financial markets and the economy more broadly as well as on corporations' ability to raise funds to invest in job-creating plant and equipment and on consumers and their ability to save for retirement and provide financial protection for their families.
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© GFIA - Global Federation of Insurance Associations
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