ARTICLE · 14 JUNE 2013

Matheson Financial Transactions Tax Update: ECB Doubtful

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The Directorate General, in providing these replies, is making it clear that an unapologetic position is being taken with regards to the likely consequences of the FTT.

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ECB enters the fray

The European Central Bank (“ECB”) has entered the debate on the proposed Financial Transactions Tax (“FTT”). Benoit Coeuré, an ECB executive board member, has said that the bank is willing to “engage constructively with governments and the European Commission to ensure that the tax has no negative impact on financial stability”. This highlights one of the key concerns of central bankers in relation to the FTT: namely, that it will increase the cost of sovereign borrowing, and remove a weapon of financial management, as central banks are active participants in the repo market. For instance, the Czech government has estimated that the annual FTT charge on the repo of government bonds would amount to 25%.

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