CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Bundesbank President Urges Caution On EU FTT

Bundesbank President Urges Caution On EU FTT

by Ulrika Lomas, Tax-News.com, Brussels

29 April 2013


President of the German Bundesbank Jens Weidmann has warned of the negative implications of the planned European financial transactions tax (FTT) on monetary policy, stating that the short-term refinancing operations of banks will be affected.

During a recent banking conference in Dresden, Weidmann stressed that although the introduction of the levy has been fundamentally agreed, the unintentional side effects of the tax might be considerable.

Weidmann explained that in its current form, the tax would include money market or so-called "repo" transactions. This will significantly impact upon the repo market, which plays a central role in liquidity balance between commercial banks, Weidmann pointed out. The consequences of this market not functioning properly will be that the transactions are then deflected into the European system of central banks or Eurosystem, meaning that central banks will be heavily involved in liquidity balance between banks for a long time after the crisis.

The Bundesbank president emphasized that from a monetary point of view, the FTT in its current form is to therefore be viewed "very critically," demonstrating how important it is to carefully examine a regulatory measure ahead of its introduction. This takes time, however, Weidmann made clear.

The European Commission unveiled its plans for a European FTT back in February. Due to be adopted by 11 European Union (EU) member states within the framework of enhanced cooperation, the Commission's proposal provides for a 0.1% tax to be imposed on share and bond transactions and for a 0.01% tax to be levied on derivative transactions. The tax is expected to generate annual revenues of between EUR30bn (USD39bn) and EUR35bn. However, there is currently a lack of consensus among the 11 participating member states as to how the proceeds of the levy should be used.

Former president of the European Central Bank Jean-Claude Trichet also criticized plans for the tax while in office. Trichet argued that an EU FTT would merely serve to penalize the European Union, if limited to Europe.

TAGS: tax | investment | European Commission | banking | tobin tax | stock exchanges | tax rates | Germany | European Union (EU) | Europe

To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »