19 May 2013

Oxera: Analysis of European Commission staff working document on the proposed Financial Transaction Tax

In February 2013, the European Commission published a staff working document on the proposed financial transaction tax. In response, the Association for Financial Markets in Europe asked Oxera to review critically the Commission’s assessment of policy options for, and impacts of, the FTT, commenting on whether the Commission’s proposals are consistent with other regulatory objectives.

This Oxera report builds on previous work undertaken by Oxera on the impact of the FTT. It finds that the FTT will make some financial transactions uneconomic, including some activities involved in market making, the trading of government debt, and repurchase agreements. For all of the products and actors considered, the FTT seems likely to deter many financial transactions that have real economic value, resulting in both lower-than-expected FTT revenues and negative economic implications due to the loss of some activity. The Commission assumes that the transactions that are deterred have little or no wider economic value, despite there being evidence to the contrary.

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