All EU Households Will Suffer from FTT

February 19, 2014 International Tax Cooperation

Financial Transaction TaxLONDON – Taxing financial transactions in Europe would directly decrease the value of the savings and financial products held by almost all citizens of European countries, and would directly affect economic stability of the EU.

The implementation of a financial transaction tax in Europe would have widespread negative effects on the value of individuals’ savings, even in countries not directly enforcing the tax, according to the results of new research released on February 18th by the UK consultancy group London Economics.

The research assessed the economic impact on household savings arising from applying a 0.1 percent tax on selected financial products and instruments traded in participating EU countries, as was proposed by the European Commission in February 2013.

The economic effects of the tax were only assessed for two selected groups of EU countries, with Germany, Italy, Spain, and Slovakia, which all intended to implement the tax, and with UK and Luxembourg, which have so far opposed the tax.

According to the results indicated in the report, among the participating countries, the tax would have the most impact in Spain, where the value of all household savings and equities would fall by 16 percent, while in Germany, Italy and Slovakia the values would fall by 14.1 percent, 12.3 percent, and 2.3 percent, respectively.

Countries which do not apply the tax could also feel the negative impact, with the value of household savings in the UK dropping by 0.6 percent, and in Luxembourg by 2.2 percent.

The decrease in the value of individuals’ savings would result in a direct hit to the economic performance of every country, with the GDP value in Italy expected to fall by 13 percent, while Spain, Germany and Slovakia see decreases of 7.6 percent, 5.8 percent, and 0.1 percent, respectively.

Photo by: Andreas Poike