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Securities trading could be “wiped out”

Securities lending could be obliterated by a new transaction tax, according to a leading trade group.

The International Securities Lending Association (ISLA) believes the levy will see lending fall by 65 per cent in Europe, cutting the £2.6bn annual income for businesses with long-term assets, such as mutual funds and pension funds, by as much as £1.6bn.

The proposals would result in a 0.1 per cent tax on bonds or stocks values, as well as a 0.01 per cent charge on derivative contracts. The changes could be implemented in 11 EU nations, which include Spain, Italy, Germany and France.

Negotiations are currently taking place, however, with regards to possible exemptions for pension funds, small business stocks and sovereign bonds, as well as a number of derivatives.

The ISLA posted a report on its website, with the group’s chief executive, Kevin McNulty, saying:

“Our analysis shows that over 65 per cent of the securities lending market in Europe would be directly impacted by this tax with key markets, such as in Germany and France, all but disappearing. This would directly lower the returns that long term investors earn from these markets and would have further implications for both the economy and financial stability.”

His comments came after a leaked memo raised some concerns about how revenue would be collected in practice. It warns that the tax is likely to lead to further costs for those involved in bonds.

No doubt businesses across the North West will be looking to their accountants on the Wirral for advice should any changes come into force.

Posted by Peter
September 11, 2013

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