Read without ads and support Scribd by becoming a Scribd Premium Reader.
See Premium Plans
 
 
Factsheet 
EuropeanCommissionagainstFinancialTransactionTax
Inaninternalpaper
1
,theEuropeanCommission(EC)hasmadeitspointclearthattheyarere-jectingafinancialtransactiontax(FTT),whichcountrieslikeFrance,Germany,Belgium,Austria,andGermanyaresupporting.TheexplanationisthattheFTTwould:
•
 
increasethecostofcapitalfortheeconomyaswellasforthestates(governmentbonds)
•
 
negativelyaffectthepricediscoverymechanisminmarkets
•
 
increasevolatility
•
 
createlessrevenuesthanisclaimedbyitssupporters,and
•
 
distributetheserevenuesunequally.TheEChowever,isnotreallydealingwiththeargumentsbroughtforwardbytheFTTsupport-ersandisnotdrawingalessonfromthefinancialcrisis.Therefore,theproponentsofthetaxshouldkeeptheircourseandconsequentlyengagefortheimplementationofanFTT.
1.Anincreaseincapitalcosts?
TheECissuggestingthattheFTTwouldleadtoanincreaseofinterestratesforprivateorpublicbondsbecauseinvestorswouldcompensatethetaxinreturnwithanincreaseininterestrates.TherebytheFTTismisunderstoodasatypeoftax,whichreducesthevalueofanasset.Thismis-judgesthebasiccharacteroftheFTT,whichdoesnottaxthevalueassuchofanasset,andthere-foredoesnotraiseitsprice,butwhichinsteadtaxesthetradewithanasset.TheactualeffectoftheFTTisthefollowing:Twodifferenteffectsarisefortwodifferenttypesofinvestors.Ontheonehandtheinvestorsthatwanttoacquireanassetforarelativelylongpe-riodoftime,basedontheirexpectationsregardingfuturepricedevelopments,andontheothersideinvestorsthatwanttoprofitfromshort-termpricefluctuationsontheotherhand.Thelong-terminvestorsbuyandselllessfrequentlyandthereforearealmostnotaffectedbyanFTT,butwouldbenfitfromtheincreasingstabilityandsecurityonfinancialmarketsthroughtheFTTfortheirlong-terminvestments.
2.Distortionofthepricediscoveryprocess
TheECassumesthatthelowerthetransactionscostsandthehighertheleveloftransactions(liquidity),thebetterthepricediscoveryprocessfunctions.Eventhoughtheyrecognizethattherearedamagingtransactions,theybelievethatthesecanbeneglected.Therealityofpresenttradeandtheexperienceofthelastdecades,however,arenottakenintoconsideration.Tradeisacceleratingandmoreandmoreandtransactionsarebeingmadewiththehelpofelectronicsystems,whichanalyseandevaluatehistoricdatainordertodeterminepricetrendstothentakeadvantageofthisknowledge.60%ofallthetransactionsattheNewYorkstockexchange

1
EU Commission. Issues Note. Financ
ialSectorTaxation.August2010.Notpublished
Search
Search History:
Searching...
Result 00 of 00
00 results for result for
  • p.
    • Notes
    Load more