While recognising that all sectors of the economy should contribute their fair share to the collective effort towards reigniting growth in the EU, it is ACCA’s (the Association of Chartered Certified Accountants) longstanding view that in order to be successful, a financial transaction tax (FTT) should be applied globally.
For the global accountancy body, a FTT restricted to only 11 participating member states would run the risk of potential negative effects on the internal market, as the tax might create additional complexity and administrative burdens. Instead, ACCA suggests that the ultimate goal should be to pursue agreement at global level.
Chas Roy-Chowdhury, head of taxation at ACCA says: 'Although we welcome the EU Commission’s intention to protect the real economy in ring-fencing day-to-day financial activities of citizens and businesses such as loans or payments, traditional investment banking activities linked to raising capital or restructuring operations, as well as transactions linked to refinancing, monetary policy and public debt management; the re-published impact assessment fails, in our opinion, to demonstrate that the revised FTT will be able to improve the stability of financial markets and create increased fiscal returns.'
Chas Roy-Chowdhury explains: 'The scope of the tax seems to have been greatly extended by using a so-called 'issuance principle' - complementing the 'residence principle' - which no longer ring-fences the tax implementation to the eleven states, and by deliberately seeking to taint transactions and products so that non-FTT states may be impacted by the tax. This would imply that any transactions would be taxed if there is a proven economic link to the FTT-zone, either through parties to the transaction, or if the traded product was issued in that zone. We question why a non-FTT state should in any way be brought within the compliance burden for this tax because of this 'tainting' mechanism.'
'In addition, the new proposal does not seem to take into account the complex nature of some financial instruments, but looks like it assumes that their market will change once the tax is implemented. As a result, complex financial products would need to be split out in 'sale' and 'purchase' instruments so that both parts of the transaction can be taxed. However, in a true single market it will not be easy to carve up a product in an artificial way between the FTT and non-FTT sectors. We cannot see how it can be acceptable that some products and transactions will be subject to double or multiple taxation,' Chas Roy-Chowdhury adds.
'We should stick to the original proposal of only applying the tax where the instrument is operated from an FTT jurisdiction. The proposals as they stand now, while trying to capture further transactions within the FTT net, prevent tax avoidance and prevent businesses from relocating their transactions in a non-FTT jurisdiction - which are in themselves absolutely laudable objectives - risk however to create a situation where a poorly engineered tax would have further unintended consequences,' Chas Roy-Chowdhury concludes.