| Practice area: | Finance | Financial markets and Institutions |
|---|---|
| Client: | N/A |
| Published: | April, 2013 |
| Keywords: | qualitative analysis quantitative analysis |
This Financial services and capital markets briefs highlights the significance of the proposed EU financial transactions tax (FTT) to the real economy. The FTT rates are small – 0.1% on equities and bonds and 0.01% on derivatives. However, the associated total tax burden may be significant through a number‐of‐transactions effect (as securities are traded frequently) and a cascade effect (as each trade between savers involves a number of intermediate transactions). As such, the FTT will increase the cost of funds for the economy and, as result, reduce investment by businesses and households, and GDP in turn; and require higher taxes and/or lower public spending.