THE COST of a financial transaction tax will go “far beyond” the tax itself for businesses and could destroy the business models of financial institutions, advisors have warned.
The European Commission this week outlined proposals to levy a 0.1% charge on all financial transactions involving a business based in the European Union. The UK has suggested it will oppose these plans.
Tom Aston, financial services tax partner at KPMG said the introduction of the tax could “destroy” the business models of financial institutions.
“The cost to affected businesses will go far beyond the cash cost of the tax itself,” he said. “Experience with collecting Stamp Duty in the UK suggests that the implementation process for this tax will be highly disruptive and expensive. The tax comes at a time when banks are already undertaking massive IT changes in response to regulatory changes.”
David Newton, global financial services tax leader at PwC, said the proposals were a “blow for financial institutions, markets and indeed consumers”.
“At a time when financial institutions are trying to build up their capital base, it seems counter-intuitive to introduce a tax which would adversely affect this goal. A financial transaction tax would also affect consumers, for example by increasing costs to investors in mutual funds in the EU, as well as in other consumer-based financial products.”
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