EUROPE - The European Commission has recognised the impact the implementation of a financial transaction tax (FTT) could have on occupational pension funds and "worked to limit the incidence of the tax outside the financial sector", according to EU tax commissioner Algirdas Šemeta.

Speaking at a meeting of members of the Finance and Fiscal Committees in the Danish Parliament, Šemeta said the Commission had been "careful" in the design of its proposal.

"At this stage of the debate, I am not surprised that some interlocutors continue to look for clarification and reassurance," he said.

"Let me here reiterate we have been particularly careful in the design of our proposal to provide strong measures to mitigate relocation risks and tax-avoidance effects."

Šemeta said the tax would be levied on financial transactions carried out by financial institutions established in the EU, wherever they engage in these transactions.

"Thus, it is not a question of where a transaction takes place, but who is party to the transaction," he said.

As a result, the Commission agreed to exempt some financial activities from the tax.

"Emissions of securities on primary markets will not be taxed so as not to affect capital raising in the private and public sector," Šemeta said.

The Commission first introduced the idea of a transaction tax - which would be levied on the purchase and sale of shares, debt securities and derivatives - last September.

At the time, it argued that the financial sector had "played a role" in the economic crisis, and that it should make a "fair contribution" for the damage caused.

It also said the FTT would reduce "competitive distortions" and discourage "risky trading", including speculation.

Last month, the Dutch pensions regulator (DNB) attacked the European Commission's controversial FTT proposal, saying it could cost the industry more than €4bn a year.

The DNB also said it was "doubtful" the tax would ever curb disruptive market behaviour - one of its stated objectives.

In a recent position paper, the European Federation for Retirement Provision (EFRP) echoed the DNB's thoughts and claimed that an FTT could increase market volatility by decreasing liquidity.

The position paper notes: "Pension funds and IORPs would be taxed to recover the costs of a financial crisis which they are not responsible for.

"On the contrary, pension funds and IORPs have been suffering the effects of the crisis and they are contributing to alleviate it by providing long-term investments and market liquidity."

According to the EFRP, an FTT could also encourage the use of less regulated domiciles outside the area covered by the tax, as well as encourage tax avoidance.