Financial transactions tax will have knock-on effect in Jersey

ISLAND finance firms have been warned that their businesses could be affected as early as the start of next year if some EU states successfully introduce a financial transactions tax.

The Portuguese have been expressing growing anger towards politicians after the government has been enacting an austerity package, that includes salary cuts and higher taxes
The Portuguese have been expressing growing anger towards politicians after the government has been enacting an austerity package, that includes salary cuts and higher taxes

ISLAND finance firms have been warned that their businesses could be affected as early as the start of next year if some EU states successfully introduce a financial transactions tax.

The warning has been issued by professional services firm Ernst & Young, with the prospects of Portugal and Italy intending to bring in such a tax on 1 January 2013 and a wider group of EU countries following suit.

There is a risk that clients of Jersey firms will end up paying the price for the European tax, with costs likely to be passed on.

Ernst & Young partner Maxine Rawlins said that a financial transactions tax (FTT) introduced by any EU Member State could have an impact on a variety of finance businesses operating in Jersey.

‘It could also impact family offices based in the Island who make certain investments in EU states, or international groups with their treasury operations based here,’ she said.

Full story in Tuesday's JEP

Comments for: "Financial transactions tax will have knock-on effect in Jersey"

ftf

FTT is another disincentive to be responsible and invest. IMF's FTT Final Report For The G-20, June 2010, "Its real burden may fall largely on final consumers rather than, as often seems to be supposed, earnings in the financial sector.

When people reduce investing, this will happen: UK Parliament European Scrutiny Committee citing the EU Commission's FTT Impact Assessment, before including negative relocation effects, "a 3.43% fall in EU GDP equates to a fall in economic output worth €421 (£362) billion and a 0.34% fall in employment equates to a loss of 812,000 jobs."

UK Parliament Economic Sub-Committee of the House of Lords, "The FTT is likely to induce a loss in GDP between five and 20 times larger than the revenues raised from the tax."

Slawek

100% correct.

Companies NEVER pay ANY taxes. A tax for the company is simply an additional cost which is passed onto us, customers.

Customers, and only customers pays all sort of taxes - simply because we customers cannot pass this onto anyone else.

Montaigne

The EU plan is for 10 basis points Tobin tax while the UK and US are thinking more like 1 basis point. Even at the higher level is it really going to have that much effect? Do we have loads of hot nano second algorithmic trading out of Jersey that would be hit by such a small amount on their trading strategies? It won't have an effect on actual investment but rather those hot money flows that are of questionable value to the markets. At the lower levels and if introduced across all major markets it would simply reduce the impact of speculative money from the likes of those big computer driven CTAs and hedge fund strategies and pricing would revert to being governed more by fundamentals. A tiny charge won't impact on actual "investing" FTF unless you call holding periods of less than a day investing!

ftf

As an investor, I have studied and researched this tax daily for 4 years.

The United States has real estate transaction costs of 9.07pc, the EU 2-18pc, esp. Spain 12.16pc, and that did nothing to slow, as many say, "hot money flows that are of questionable value".

The DCB study showed that 1.7 billion euros, over 42% of the annual FTT cost in the Netherlands, would be borne by pensions.

DWS computed that a Riester-Rente – a German annuity contract – where the customer pays 100€ per month over 40 years would lose about 10%.

The Wellcome Trust calculates an FTT would cost it £32m a year, equivalent to its 600-person strong programme in Kenya.