Securitisation and Regulation News

Financial Transaction Tax: AFM argues that EU financial transaction tax is undesirable, Cabinet endorses view

The Netherlands Authority for the Financial Markets (AFM) has published a letter it has sent to the Dutch Ministry of Finance, in which it argues that the introduction of a European financial transaction tax (FTT) is undesirable. According to the AFM, the FTT will have adverse effects on the transparent and efficient functioning of financial markets, financial stability and, ultimately, on the real economy and the certainty of pensions for Dutch civilians.

The AFM also states that the FTT is not an appropriate instrument to realise the European Commission's objectives of providing for a contribution by the financial sector to the costs caused by the financial crisis, the harmonisation of current national regulations and strengthening of the internal market, and discouraging undesirable market behaviour which should result in more financial stability.  The AFM believes that the intended behavioural effects can be achieved with less effort by directed incentives contained in specific regulations.

In addition, the Dutch Cabinet has submitted to Parliament its response to the evaluation conducted by the Centraal Plan Bureau (CPB), the government body for economic planning, on an FTT in the EU.  The Dutch Cabinet has indicated that, although it endorses the objectives of the FTT, it wanted to conduct a thorough assessment of the consequences of an FTT for the Dutch financial sector and, in particular, for the pension sector.

Based on the CPB's analysis, and upon consultation with the AFM and the Dutch Central Bank (DCB), the government believes that the introduction of an FTT would not, or not in an efficient way, contribute to the Commission's objectives.  The government notes that a number of measures are currently being prepared which would contribute to financial stability, such as the MiFID review and the proposed regulation on OTC derivatives and market infrastructures.  As to the contribution to the general means, the CPB noted that there are alternatives to the FTT that would have a less distortive effect on the market. In this respect the Dutch Cabinet intends to invite the Commission to conduct further research on alternatives, such as the introduction of a financial activity tax, a (European-wide) banking tax or a stamp duty.  Finally, the Cabinet's letter indicates that is not a proponent of the Commission's proposal to use a part of the FTT proceeds for the general means of the European Union.

pdf download letter

pdf download response