Taxing proposal: FTT would drain liquidy, stifle growth​

ESBG gives statement on proposed financial transactions tax (FTT)

​​BRUSSELS, 11 September 2015 –​ Introducing a financial transaction tax (FTT) on financial products and activities simply won’t do any favours for the internal market nor the economy.
Research has clearly shown that the FTT applied as proposed would distort both the functioning for the internal market for financial services and competition among operators based on where they are located. Costs of funding would swell, which impacts companies throughout the economy seeking to expand through financing. This policy approach contradicts the stated aim by policymakers to boost growth – and the associated jobs.
Banks and related financial services would suffer greatly from the proposed FTT’s far-reaching scope. Essential activities like sovereign bond issuance and purchase would be slashed, something governments need to finance their budget deficits. Use of derivatives contracts for hedging would decline, while repurchase agreements that provide secured liquidity to the market would dry up. Taxing market making activities would stem the flow of market liquidity. Intra group transactions inside bank operations, vital to liquidity management and efficient capital allocation, would be hit. 
Europe can ill afford to move forward with such a market-damaging tax. The right path to swell tax coffers, especially in the long term, leads to policy that helps revive European business creation and expansion and the added payrolls that come with it – something Europeans desperately crave.

Financial Transaction Tax; Regulation; Supervision