On Wednesday the European Parliament approved a comprehensive financial transactions tax for 11 EU countries.
The tax will cover trades in stocks, bonds and derivatives, at 0.1% for stocks and bonds and 0.01% for derivatives. Flexibility exists for countries to impose higher rates on “riskier” trades and there are lower rates for certain pension funds and sovereign bonds.The expected additional revenue is 57b Euros, although some commentators have predicted it will lose money because of the impact on trading activity.
Now the new tax has been approved by the EU Parliament it is up to the 11 participating states, Austria, Belgium, Estonia, France, Germany, Italy, Greece, Portugal, Slovakia, Slovenia and Spain to agree on implementation.Note the absence of UK who (including the Archbishop of Canterbury) oppose the tax. The UK already has a stamp duty of 0.5% on certain financial transactions in any event.
The original target go live date was 2014 and that still seems achievable.
What does this mean for NZ? Our law makers are likely to maintain a watchful eye on how the new tax goes in Europe. National party leaders had expressed the view Europe was “unlikely” to adopt a Financial Transactions Tax and Labour is mildly supportive of the tax but wants to wait and see overseas experience. The Maori Party, Mana and the Greens are on record as supporting a Financial Transactions Tax.
My pick is it is just one aspect that will be considered as law makers here generally look at how financial transactions are taxed and, in particular, whether the current exemption from GST for financial services should be removed or reduced.