Exchanges

Portugal exchange chief warns of EU FTT damage

The head of the Portugal's domestic stock exchange has demanded the government pulls its support for a European financial transaction tax (FTT) until it has the backing of all EU members.

Laginha Luís de Sousa, president of NYSE Euronext-owned Lisbon Stock Exchange, told a conference last week the proposed tax was unjust as it did not cover all EU members and would render Portugal less attractive for foreign investors and limit economic growth.

De Sousa believes financial institutions will pass the tax on to end investors and said, based on the current draft of the tax, it had all the ingredients to go wrong.

Portugal is one of three EU members supporting a regional FTT while also backing a separate national levy. De Sousa commented that the Portuguese government's proposed plan to tax equities, bonds and derivatives at 0.3% - a higher rate than the EU plan - would also negatively weigh on the country's economy.

While no date has been set to implement the Portuguese tax, it is expected to come into force before the of end of 2014. 

Earlier this month the European Commission published its proposal for a Europe-wide FTT after 11 member states advanced the tax under 'enhanced cooperation', a legislative tool requiring only nine EU member states' support.

The proposal has been criticised for its broad approach of taxing financial institutions 'established' in one of the 11 member states, which include two of Europe's powerhouse economies France and Germany, but not the UK. This means transactions conducted anywhere in the world would be subject to the levy, and entities trading instruments issued within one of the member states would also be charged.

The plan has also been criticised for the possibility it could tax one transaction multiple times.

The European FTT would hit equity and bond transactions at 0.1% and derivatives at 0.01% of notional value and would bring in €30-35 billion annually, according to Commission estimates.

Besides Portugal, other countries pursuing a national FTT are Italy and France. Spain dropped plans to form a national tax in December and stated it would instead work towards a European tax.

Richard Henderson +1 212 217 6916 richard.henderson@information-partners.com