AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

AIMA says financial transaction tax could undermine EU single market

17 January 2012

The proposed European Union financial transaction tax (FTT) could lead to a significant decrease in cross-border trading of financial instruments in the EU, undermining the single market, according to the Alternative Investment Management Association (AIMA), the global hedge fund association. 

AIMA, which has carried out a comprehensive analysis of the proposed FTT, said there would be a significant slowdown in trading of financial instruments like shares, bonds and derivatives in the EU.

The AIMA analysis concluded that the FTT would have widespread, unintended damaging consequences. As well as undermining the EU’s single market, the FTT would be likely to reduce EU taxpayers’ savings and pensioners’ incomes, lead to a reduction in the level of investment in the real economy, send asset prices lower, widen spreads, hinder efficient price discovery and increase market volatility.

The Commission’s own studies concluded that the FTT would leave the EU worse off by tens of billions of euros annually. It estimated that the FTT’s annual revenues would be approximately €25bn-€43bn, but there would also be a reduction in EU-wide GDP of between 0.53% (€86bn) and 1.76% (€286bn).

Even that considerable cost may have been underestimated, AIMA said, because it did not fully take account of the “cascade” effect of taxes being applied to every constituent part of a particular trade.

AIMA CEO Andrew Baker said: “Our analysis concludes that the EU’s proposed financial transaction tax will reduce or eliminate a vast amount of cross-border share and bond trading activity within the European Union, thus undermining the Single Market. And we are not talking about complex financial transactions but very simple buying or selling of shares undertaken by ordinary investors. This could have very serious unintended consequences - including a further tightening of financing conditions for business - at a critical moment for the European economy.”

Equity, bond or derivatives trades routinely involve one or more intermediaries such as dealers and brokers, often located in a different EU member state from the buyer or seller.

The Commission’s own studies acknowledge that simple share trades usually require a much longer transaction chain, with one or more intermediaries being interposed between a client and a trading venue in another EU member state. AIMA said the Commission had underestimated the widespread extent of this practice and overestimated the degree to which buyers and sellers would be able to change existing practices to reduce the number of transactions necessary for a cross-border trade. A smaller, less liquid market in the majority of Member States would be the outcome, said AIMA.

Andrew Baker said: “Article 113 of the Lisbon Treaty, which is the legal basis of the Financial Transaction Tax proposal and which states that taxes are to be introduced only ‘to the extent that such [tax] harmonisation is necessary to ensure the establishment and the functioning of the internal market’, is being used to present a proposal that would lead to a significant reduction of much cross border trading in the EU because it would attract double or triple the tax burden compared to purely domestic transactions.”

The full AIMA analysis can be viewed here:
http://www.aima.org/download.cfm/docid/0C29CD99-353F-403B-B9D4DB267A42838F
 

- Ends -
 

For media enquiries, please contact Christen Thomson, AIMA’s Director of Communications. Tel: +44 (0)20 7822 8380; Email: cthomson@aima.org

About AIMA

As the global hedge fund association, the Alternative Investment Management Association (AIMA) has over 1,300 corporate members (with over 6,000 individual contacts) worldwide, based in over 40 countries.

Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.

AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.
 

 
 
Back to Listing

Main Menu

  1. Home
  2. About
    1. Our Core Objectives
    2. AIMA's Policy Principles
    3. Meet the team
    4. AIMA Council
    5. Global Network
    6. Sponsoring Members
    7. Global Partners
    8. FAQs
    9. Opportunities at AIMA
  3. Join AIMA
    1. Benefits of Membership
    2. Membership Fees
    3. Application form
  4. Members
    1. AIMA DDQs
    2. AIMA Annual Reports
    3. AIMA Governance
    4. AIMA Logo
      1. Policy note
    5. AIMA Members' List
    6. AIMA Review of the Year
    7. Committees and Working Groups
    8. Weekly News
    9. Update Profile
  5. Investors
    1. AIMA Investor Services
    2. AIMA Members' List
    3. Investor Steering Committee
    4. Update Profile
  6. Regulation
    1. Asset Management Regulation
      1. EU Asset Management Regulation
        1. AIFMD
        2. European Capital Markets Regulation
        3. MiFID / MiFIR
        4. UCITS
        5. European Venture Capital Directive
        6. Shareholder Rights Directive
        7. European Long Term Investment Fund Regulation
        8. Loan Origination Funds
        9. Capital Raising
        10. AIFMD-Related Events
      2. US Hedge Fund Adviser Regulations
        1. Registration and Reporting
        2. Incentive-Based Compensation
        3. JOBS Act
      3. Asia Pacific Asset Management regulation
      4. Other Jurisdictions’ Asset Management Regulation
      5. Systemically Important Financial Institutions ('SIFIs')
      6. Remuneration
        1. UK
        2. United States
        3. CRD IV and CRR
        4. AIFMD
        5. MiFID
      7. Shadow Banking
      8. Volcker Rule
      9. Other
      10. Systemic Risk Reporting
      11. Dealing Commision
      12. Corporate Governance
    2. Markets Regulation
      1. Bank/Capital Regulation
        1. Capital Requirements Directive
        2. EU Bank Structural Reforms
      2. Derivatives/Clearing
        1. EMIR
        2. MiFID / MiFIR
        3. MAD / MAR
        4. Dodd-Frank Act Title VII
        5. Hong Kong
        6. IOSCO
        7. Singapore
      3. High Frequency Trading
        1. ESMA Guidelines
        2. MiFID / MiFIR
        3. MAD / MAR
        4. Flash Crash
        5. IOSCO
        6. Germany
        7. CFTC Automated Trading
      4. Insurance Regulation
        1. Solvency II
      5. Market Abuse
        1. MAD / MAR
        2. Indices as Benchmarks
      6. Position Limits
        1. MiFID / MiFIR
        2. CFTC Position Limits
      7. Resolution of Financial Institutions
        1. Europe
          1. EU Bank Recovery and Resolution Directive
          2. EU Non-Bank Recovery and Resolution
        2. CPSS-IOSCO
        3. Financial Stability Board
        4. UK
        5. USA
      8. Short Selling
        1. EU Short Selling Regulation
        2. Hong Kong Short Selling Regulation
        3. US Short Selling Regulation
        4. Short Selling Bans
      9. Securities Settlement
      10. Shadow Banking
        1. International Shadow Banking
        2. EU Shadow Banking
      11. Trading
        1. MiFID / MiFIR
        2. Dodd-Frank Act
    3. Tax Affairs
      1. Automatic Exchange of Information (AEOI)
        1. FATCA
        2. EU - AEFI
        3. OECD - Global Standard on AEFI
      2. Australia - Investment Manager Regime (IMR)
      3. Base Erosion - Profit Shifting (BEPS)
      4. FAIFs and FINROFs
      5. FIN 48 and IAS 12
      6. Financial Transaction Tax (FTT)
      7. UK Investment Management Exemption (IME)
      8. UK Offshore Funds Regime
      9. Other
    4. AIMA's Policy Principles
    5. Search
    6. Resources
      1. Guidance Notes
      2. Jurisdictional Guides
      3. Noticeboard
        1. AIFMD
        2. BEPS
        3. CFTC Registration and Exemptions
        4. Dealing Commission
        5. Derivatives
        6. FATCA
        7. FTT
        8. High Frequency Trading
        9. MiFID / MiFIR
        10. Other Hot Asset Management Topics
        11. Other Hot Markets Topics
        12. Other Hot Tax Topics
        13. Position Limits
        14. UK Partnership Tax Review
        15. Trading
        16. Volcker Rule
      4. Hedge Fund Manager Training
      5. Quarterly Regulatory Update
      6. Webinar Programme
      7. Regulatory Compliance Association
        1. About the Regulatory Compliance Association
        2. RCA Curricula and initiatives for alternative investment firms
        3. Meet the regulators and Sr. Fellows
  7. Education
    1. "The Case for Hedge Funds"
      1. Global Hedge Fund Industry Paper: The value of our industry
      2. The Value of the Hedge Fund Industry to Investors, Markets and the Broader Economy: Research commissioned by AIMA and KPMG
      3. The Evolution of an Industry: KPMG/AIMA Global Hedge Fund Survey
      4. Contributing to Communities: A global review of charitable and philanthropic activities by the hedge fund industry
      5. Beyond 60-40: The evolving role of hedge funds in institutional investor portfolios
      6. The Cost of Compliance: Global hedge fund survey by AIMA, MFA and KPMG
      7. Capital Markets and Economic Growth: Long-term trends and policy challenges
      8. Apples and Apples: How to better understand hedge fund performance
      9. The Extra Mile: Partnerships between hedge funds and investors
      10. Key articles by AIMA on the case for hedge funds
    2. AIMA Journal
      1. Recent issues
      2. Search AIMA Journal articles
      3. AIMA Journal Archive
    3. AIMA Guides to Sound Practices
    4. AIMA guides for institutional investors
    5. CAIA Association pages
      1. FAI
    6. Regulatory Compliance Association pages
      1. About the Regulatory Compliance Association
      2. RCA Curricula and initiatives for alternative investment firms
      3. Meet the regulators and Sr. Fellows
    7. Services to Start-up Managers
    8. Useful Websites
    9. Glossary
  8. Events
    1. AIMA Events
    2. AIMA webinars
    3. Industry events
  9. Media
    1. Press Releases & Statements
    2. AIMA's blog
    3. Media Coverage
      1. Articles by AIMA
        1. Archive
      2. AIMA in the news
      3. Video interviews
      4. Industry news
    4. Media Contact
    5. Press Materials