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Lithuania has decided to delay adopting the European Union's Financial Transaction Tax, despite an announcement from Prime Minister Algirdas Butkevicius last month that the tax would be implemented in early 2013.
The government has decided that it needs to gather further information about the possible effects of the tax, particularly in relation to Lithuania-based branches of foreign banks.
Algirdas Semeta, EU Commissioner for Taxation, had assured Butkevicius in December that the FTT would be "very small," and it would have only a small effect on bank costs. However, Stasys Krop, who is President of the Lithuanian Association of Banks, complained recently that nothing was clear about the tax, and he suggested that its contribution to the country's tax revenues would be negligible.
Eleven European Union countries have so far agreed to implement the tax, and Semeta argued in October that enhanced cooperation on the issue would strengthen the Internal Market and create a less complex business environment. However, some member states are vociferously opposed to the tax, and UK Prime Minister David Cameron has dismissed it as "simply madness." Sweden saw trading activity move to London when it brought in a similar tax in the 1980s, and the Dutch central bank has warned that traders may relocate to avoid the tax.
The Alternative Investment Managers Association is also opposed to the tax. The Association estimates that the tax will raise approximately EUR25bn-EUR43bn (USD32-55bn), but that the EU's GDP would be reduced by at least between 0.53% (EUR86bn) and 1.76% (EUR286bn). This would leave the EU worse off by tens of billions of euros, it argues.
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