Financiers 
step up 
transaction 
tax battle

OPPONENTS of a proposed financial transaction tax said the new charge would lead to a massive upheaval in the financial services industry, shackle investors and harm the economy.

Stepping up their lobbying against the tax, which 11 eurozone countries plan to introduce next January, critics said repurchase transactions and market-making in government bonds should be exempt to avoid bumping up costs for governments.

The 11 countries have agreed in principle to impose a tax from January 2014 to make banks pay for help in the financial crisis.

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The other European Union states, including the UK have refused to join in.

The bloc’s European Commission has drafted rules to implement the tax to raise up to E35bn annually but they have yet to be approved by the 11 countries.

It will be imposed on stocks, bonds, derivatives, repurchase agreements (repos) and securities lending with trades anywhere in the world linked to securities from the 11 markets covered.

The repo industry stepped up its lobbying yesterday to water down the tax by publishing a report that challenged the motives behind the tax and outlining the impact it could have on repos.

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“The specific intention of the authors of the FTT is to sweep away the current system of financial intermediation by primary dealers and secondary market-makers, and build an entirely new financial system,” a study commissioned by the European Repo Council, part of the International Capital Market Association (ICMA), said.

New issues would be distributed directly to investors who would be taxed out of the secondary market and confined to passive strategies such as buy-and-hold, the study added.

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