The proposed financials transaction tax could have major negative connotations for the European fund management industry, according to the chairman of industry body ALFI.
Speaking to Citywire Global, Marc Saluzzi, who was elected chair of the Association of the Luxembourg Fund Industry in September 2011, said his organisation was very closely monitoring the fallout of a proposed taxation on individual trades.
In Brussels last week, EU ministers granted 11 European countries – including France and Germany – approval to pursue a potential levy on trades.
‘We are waiting to see how a financials transaction tax would be defined. However, it is certainly a disaster for the fund management industry as it will impact at a lot of levels, both for fund management firms and investors,’ Saluzzi said.
‘The impact that this measure has is something we have to look at both in terms of the 11 countries which have agreed to it but also the wider side-effects for other fund industry centres, such as Luxembourg.’
Saluzzi said one of the major aspects of the proposed tax is the involvement of Germany and France, which account for around €1 trillion of assets under management in the Ucits funds industry.
The proposed measure, known as the FTT, is going through technical sessions both within the European Union and the 11 states which have agreed to it. The measure is expected to therefore come into effect in January 2014.
Camille Thommes, director general at ALFI, pointed to the added impact the proposed taxation will have on investors seeking to alter subscriptions or redeem their investment.
‘Depending on how the tax is clarified around these points, it could have a major impact on investors in European funds and the investor interest in the region. I think a measure like this could certainly lead investors to lose interest in Europe.’
Brussels-based trade body EFAMA has estimated the cost of a financials transaction tax could be in the region of €38 billion. This is calculated as €15 billion tax on buying and selling, as we as €23 billion in liabilities.