fpmi: Introduction of tax on securities turnover detrimental to all
27. Apr 2009, Munich Financial Centre Initiative
FPMI views this move as being a step in the entirely wrong direction, and as being an encumbrance most heavily burdening those small investors whose provisions for their old age take the form of investing in funds, ‘Riester’ products (equivalent to the USA’s Keogh plans) and shares.
Plans foresee levying taxes amounting to between 0.5% and 1.5% percent of the turnover ensuing from the purchase or sales of securities on exchanges, regardless of whether these transactions had resulted in profits or losses for the investor. According to fpmi, this encumbrance would make investments in stocks and in mutual funds much more unattractive, and would thus reduce the liquidity available on the stock markets. This, in turn, would enhance the volatility of stocks. This increase in volatility would give rise to new incentives for speculation, and would impair the efficiency of the setting of prices for securities on the exchanges. This result would be, in fact, precisely the opposite of what the tax’s proponents plan on achieving: hindering short-term speculation.
As the above shows, rather than achieving that result, the tax on securities turnover would be a detriment to the economy as a whole, leading, as it would, to companies experiencing greater difficulties in refinancing their operations. Small investors would have less money for their old age. That conclusion was reached by a study issued in the United Kingdom, which found that the 0.5% tax on securities turnover in force there was costing British pensioners up to 2.38% of their savings for their old ages.
Another fact which has to be taken into account: the final withholding tax promulgated in January 2009 has led to investments in securities in Germany’s being very heavily encumbered, by international standards. A further tax would comprise an even greater operating disadvantage for Germany’s financial community and for the investors based in the country. This would cause the latter to avoid Germany - with all of the negative and attendant results.
The supporters of the tax maintain that speculation on securities exchanges is the cause of the crisis gripping the world’s economy. “This position has absolutely no basis in fact,” stresses Christine Bortenlänger, fpmi’s spokesperson and CEO of the Munich Stock Exchange, in rejecting what the Initiative regards as being an ill-founded and incomprehensible position. “Rather than having profited from the crisis, investors in securities have actually been the ones most seriously affected by it.” FPMI has also another reason for criticizing the tax: the motives informing its being proposed. Politicians who have stated that someone has to bear the enormous costs of the international financial crisis have come out in favor of the tax on securities turnover. These politicians have obviously thus resolved upon investors in securities’ paying this bill.
Plans foresee levying taxes amounting to between 0.5% and 1.5% percent of the turnover ensuing from the purchase or sales of securities on exchanges, regardless of whether these transactions had resulted in profits or losses for the investor. According to fpmi, this encumbrance would make investments in stocks and in mutual funds much more unattractive, and would thus reduce the liquidity available on the stock markets. This, in turn, would enhance the volatility of stocks. This increase in volatility would give rise to new incentives for speculation, and would impair the efficiency of the setting of prices for securities on the exchanges. This result would be, in fact, precisely the opposite of what the tax’s proponents plan on achieving: hindering short-term speculation.
As the above shows, rather than achieving that result, the tax on securities turnover would be a detriment to the economy as a whole, leading, as it would, to companies experiencing greater difficulties in refinancing their operations. Small investors would have less money for their old age. That conclusion was reached by a study issued in the United Kingdom, which found that the 0.5% tax on securities turnover in force there was costing British pensioners up to 2.38% of their savings for their old ages.
Another fact which has to be taken into account: the final withholding tax promulgated in January 2009 has led to investments in securities in Germany’s being very heavily encumbered, by international standards. A further tax would comprise an even greater operating disadvantage for Germany’s financial community and for the investors based in the country. This would cause the latter to avoid Germany - with all of the negative and attendant results.
The supporters of the tax maintain that speculation on securities exchanges is the cause of the crisis gripping the world’s economy. “This position has absolutely no basis in fact,” stresses Christine Bortenlänger, fpmi’s spokesperson and CEO of the Munich Stock Exchange, in rejecting what the Initiative regards as being an ill-founded and incomprehensible position. “Rather than having profited from the crisis, investors in securities have actually been the ones most seriously affected by it.” FPMI has also another reason for criticizing the tax: the motives informing its being proposed. Politicians who have stated that someone has to bear the enormous costs of the international financial crisis have come out in favor of the tax on securities turnover. These politicians have obviously thus resolved upon investors in securities’ paying this bill.