ICC in the Financial Times
The below Letter to the Editor, co-signed by the Chair of the ICC Commission on Taxation, appeared in print and online editions of the Financial Times today.
We need tax
policies that will foster sustainable growth from Mr Chris Lenon, Mr Theo
Keijzer and Mr Krister Andersson.
debate about the pros and cons of a financial transaction tax continues.
Different governments either support it or oppose it. The business community
opposes its introduction for reasons unrelated to the financial sector impact.
are many. The FTT will reduce the number of transactions and hinder optimal
reallocation of assets. A proper risk adjustment will therefore take place
first when market developments are sufficiently large to also pay for the tax.
As a consequence of the “sand in the wheels”, risk will increase and investors
will require compensation. This will increase costs and will make corporate
investments more expensive. To some extent, this increase in cost can be
avoided if transactions are shifted out of Europe but then the objective of the
proposal will not be met. We look back to the experience of Sweden in the 1980s
which was disastrous for Sweden (and very beneficial for London). Some have
suggested that a different “recipe” will avoid this problem now – none of our
Swedish colleagues believe this. Some compare the FTT to UK stamp duty, this is
a false comparison in terms of which transactions are subject to stamp duty and
the mechanisms tolerated that allow its avoidance. Stamp duty is a tax on some
transactions, not all.
European Commission has analysed where the burden of the tax will fall and the
effect on gross domestic product, and this is key. The FTT is born by the
customers of the financial sector: businesses, individuals, pension funds,
pensioners and buyers of financial products. The Commission’s assessment is
that an FTT could reduce GDP by as much as almost 2 per cent at a time when all
politicians are searching for a recipe to stimulate growth. Some delegates of
the recent meeting of the EU’s economic and financial affairs council, Ecofin,
questioned whether the costs would not be even higher.
delicate state of the European and global economies we need international tax
policies that do not add fire to an already volatile market and wobbly economy
but which provide government revenues while fostering sustainable growth. While
an FTT would indeed raise some government revenues in the short term, it would
immediately negatively affect the economy and not foster growth. That is why
the business community opposes this tax.
Lenon, Chairman, Business and Industry Tax Advisory Committee to the
Organisation for Economic Co-operation and Development
Keijzer, Chairman, Taxation Commission of the International Chamber of Commerce,
Andersson, Chairman, Tax Policy Group, Businesseurope