Financial organisations have bitterly attacked plans by the European Commission to levy a 20% withholding tax on bank accounts and international securities.
Although expected to take two years to go through the European parliament before being passed by the Council of Ministers, the Zurich-based International Securities Market Association called the proposal ‘fundamentally misconceived.’
ISMA said it would cause substantial losses to bond-holders if issuers recalled bonds at their original value. John Langton, ISMA’s chief executive, said the association was opposed to the directive unless an exemption was made for the eurobond market.
He added: ‘This ill-considered and badly drafted legislation has the potential to push up the cost of borrowing and, as a result, drive the debt market out of the EU altogether.’
The London-based International Primary Market Association said the directive would encourage parts of the international capital market to move out of the EU, causing unemployment and loss of revenue.
A spokesman for the European Commission said plans for the directive were originally taken by the 15 Ecofin states on 1 December 1997 to ensure some form of minimum taxation on all cross-border investment in the community.
He added: ‘We want to ensure all positions are carefully taken.’
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