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It is unlikely that any single FTT will work for all products

Financial Times  

31 May 2013


Letter to the editor

Sir, Avinash Persaud is right to point out that arguments used by opponents of the proposed financial transaction tax are in places contradictory or disproportionate (“Europe should embrace a financial transaction tax”, May 29). However, he fails to provide a compelling reason why this particular FTT should be embraced.

The biggest weakness in his argument is that he fails to consider the structure of the tax in respect of the many different asset classes to which it would be applied. Instead, he bases his discussion of completely different markets largely on equities.

Apart from the potential impact of these proposals on the repo markets, applying a 0.01 per cent tax to derivatives trades, levied on notional value, makes little sense as the basis for a tax.

It is, of course, by no means impossible to levy taxes on financial markets transactions, as in the case of UK stamp duty, nor is it necessarily a bad idea. However, these proposals are misconceived, and it is unlikely that any single model will work for such different products.



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