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Ford hits out at 'burden' of FTT

Friday 13 January 2012 - by Karina Whalley

 British MEP Vicky Ford has lashed out at a proposed financial transaction tax in Europe saying the burden will fall hardest on pension funds and business.

The parliamentarian, also a member of the economic and monetary affairs committee, voiced her fear over the tax's liquidity impact as traditional market makers would not be exempt and said the UK is "right to veto this tax".

"I am very concerned that the way the transaction tax is structured will allow financial players simply to relocate overseas - taking tens of thousands of jobs with them, but without reducing risks in financial markets," she said in a statement on her website on Wednesday.

"Rather than hitting banks or hedge funds, the tax burden will then fall on investors such as pension funds, real businesses and insurance companies.

"Pensioners could be hit especially hard by this tax," she added.

Proposals for an FTT were put forward by the European Commission in September 2011 in a bid to raise up to €57bn a year and curb excessive speculative trading. The measure would tax stock and bond trades at a rate of 0.1 per cent and derivative trades at 0.01 per cent.


Although the proposed charge of 0.1 per cent seems "tiny", Ford says there would be a considerable impact if an investor sells 10 UK government bonds to buy German ones.

The 0.1 per cent charge would be paid twice for the buy and sell and given an annual yield on government bonds of just 2 per cent, the tax on the trade would effectively be one tenth of the annual income from the bond investment, says Ford.

Although she understands why many want to see increased levies on financial institutions and supports taxes like the UK's bank levy, Ford says the particular structure of the commission's FTT is worrying.

The proposed tax's impact on liquidity is especially concerning, she says.

Market makers in the UK are explicitly excluded from stamp duty on shares as they help to keep financial markets running efficiently, however they will not be exempt from an EU financial transaction tax, she warned.

The tax was developed to dampen speculative trading, but Ford highlights the difficulty in differentiating between market-making and speculative trades.


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