The proposed pan-European financial transaction tax (FTT) will hurt businesses that are sorting out their balance sheets, said Javier Hernani, managing director of Spanish exchange operator BME Group.
Speaking to journalists in London today, Hernani said the tax would be damaging to businesses that were reforming their balance sheets to reduce debt and increase equity and will ultimately hurt recovering economies in Europe.
Last week, at a French-German summit in Brussels, German chancellor Angela Merkel and French President Francoise Hollande, both pledged to push for the FTT to be finalised before European Parliament elections in May. Hollande also told reporters in Brussels that he was willing to compromise on the terms of the tax to push it through.
Hernani claims companies in Spain, which was badly affected by the eurozone and sovereign debt crisis, have been exercising fiscal responsibility, but is worried the FTT will punish them for it.
“Businesses in Spain have been shifting their balance sheets away from debt and towards equity and this is the right thing to do,” Hernani explained, “However, now politicians are going to tax this, by taxing equity. It makes no sense.”
The proposed FTT is being supported by 11 EU member states, including Spain, and initially planned to levy a 0.1% tax on equity trades and a 0.01% tax on derivatives trades. However, politicians have struggled to agree and it is widely expected that the tax rates will be watered down to around 10% of their original level.
German stock exchange operator Deutche Börse said it is also mindful of the political discussions around the tax, suggestion the tax may only be implemented by a much smaller group of countries than the 11 currently participating in discussions.
“Deutsche Börse has noted the commitment of the German government to the financial transaction tax – while we remain fully aware that the political discussion on this issue is not yet over.
If, however, the bad experiences that countries such as France and Italy have had with financial transaction taxes mean that a core group of countries go it alone,
Deutsche Börse’s broad positioning means that it is not vulnerable to such a development. And preparing our company for changing circumstances is one of the duties of the executive board,” said Reto Francioni, CEO of Deutsche Börse.
Hernani said support varies significantly between different countries that are looking to implement the FTT.
“The Spanish government is taking a more pragmatic approach on this and has not been pushing hard on the issue. I also don’t think it likely the Spanish would introduce their own tax after seeing the effects similar FTTs have had in France and Italy,” he added.
The Council of the European Union is currently being headed by Greece, which is thought to be keen to introduce the FTT and push the issue on. However, with European elections just a few months away, politicians will be hard pushed to come to an agreement before then.