APPENDIX 3: CALL FOR EVIDENCE |
The House of Lords EU Economic and Financial Affairs
and International Trade Sub-Committee, chaired by Lord Harrison,
is launching an inquiry into a Financial Transaction Tax and its
implications for the UK. We invite you to contribute evidence
to this inquiry.
The financial crisis, and its associated impact on
Government finances, has intensified debate about the use of taxation
either as a way to correct the effects of excessive risk-taking
on financial institutions or as an instrument to ensure that the
financial sector makes a substantial contribution to public finances.
On 28 September the Commission published its proposal
for a Directive on a common system of Financial Transaction Tax
(FTT). France and Germany are expected to bring forward their
own proposal in the near future. The French Presidency of the
G20 has made discussions over a financial transaction tax one
of its priorities.
From a UK perspective it is inevitable that the proposition
of a tax on the financial sector will attract attention given
London's status as Europe's largest financial centre. The UK Government
have expressed concerns about introducing such a tax unless it
is done on a global basis.
The purpose of the inquiry is to investigate the
rationale behind the introduction of a financial sector tax, and
will focus primarily on the Commission's proposal for an FTT.
It will consider the potential risks, benefits and shortcomings
of an FTT and its significance for the City of London. It will
assess whether an FTT could plausibly be implemented at an EU
level, or whether it will only work effectively if implemented
The inquiry will not consider the debate on an FTT
as a possible revenue stream for the EU budget. It will nevertheless
welcome views on any other possible uses of revenues arising from
Particular questions raised to which we invite
you to respond are as follows (there is no need for individual
submissions to deal with all of the issues):
PART I General questions on financial sector taxation
(1) Is there a case for the introduction of a
tax on financial transactions? Does the current exemption from
VAT for most financial and insurance services lead to a tax advantage
for the financial sector?
(2) What would be the most appropriate form for
a taxation of the financial sector? Would a Financial Activities
Tax (FAT) be a preferable means of taxing the financial sector?
Would other variations (e.g. a currency transaction tax, a securities
transaction tax or a financial tax on derivatives) be a more desirable
form of taxation?
(3) What lessons can be learnt from the experience
of other countries (such as the transaction levy introduced in
Sweden in 1984 and abolished in 1991) in relation to a financial
sector taxation scheme?
PART II Specific questions on the Commission's proposal
for an FTT
Rationale for an FTT and scope
(4) What is your assessment of the Commission's
objectives as contained in its proposal for an FTT? Are they fair
(5) Does the Commission proposal for an FTT reflect
the most desirable design for an FTT?
(6) On which transactions should the FTT be levied?
Is it appropriate for the FTT to be levied on shares, bonds, derivatives
and structured financial products as suggested by the Commission?
What should be the rate of the FTT?
(7) Is it appropriate for the FTT to be applied
on the basis of the residence principle as proposed by the Commission?
How likely is the residence principle to work in practice?
(8) How significant is the potential for the
FTT to raise significant revenues? How reliable would it be as
a revenue stream? Where would the true incidence of the FTT fall?
Should the revenues arising from the FTT be used to finance the
deficits of Member States?
Impact and effectiveness
(9) Would the Commission's proposal for an FTT
be effective in addressing short term volatility and curbing harmful
speculation? Would it reduce excessive risk taking?
(10)What would be the impact of the FTT on market
liquidity? What effect would the FTT have on speculation in sovereign
(11)How easily could the FTT tax be circumvented
by market operators?
Impact of the FTT in the UK
(12)What impact would the FTT have on the UK's financial
services sector and the City of London, as well as the UK economy
more broadly? If a significant proportion of any transaction tax
accrued in London, would the burden necessarily fall on British
(13)How would you assess the likelihood that the
FTT would cause financial services to relocate outside the EU,
or contribute to a migration of financial transactions towards
less regulated parts of the financial sector? Does the UK experience
with the stamp duty demonstrate that a modest FTT is not inconsistent
with maintaining a successful stock exchange?
(14)Will the FTT duplicate existing taxes in countries
which have already implemented a bank levy, such as the UK?
(15)Could such an FTT be plausibly introduced at
an EU level, or would an FTT only be effective if introduced globally?
Should an FTT be introduced at EU level regardless of whether
it is introduced at a global level? In the event that an FTT is
not introduced at EU level, would there be a case for its implementation
by euro area countries alone?
Those responding to this call for evidence are not
necessarily expected to address all these points but instead to
focus on those issues on which they have special expertise or
about which they are particularly concerned.
The deadline for written evidence is Monday 7 November