Industry associations have reiterated their concerns about plans for a financial transaction tax (FTT) ahead of a meeting tomorrow of the technical experts from the EU states aiming to implement the tax.
PensionsEurope and Insurance Europe have written to ambassadors from the 10* EU countries that have pursued the introduction of an FTT under the so-called enhanced cooperation procedure after an initial proposal from the European Commission was blocked by a majority of member states.
Exempting pension funds from the tax has been discussed before within the group of 10 countries, but according to PensionsEurope, pension funds and their asset managers regretfully “remain in the scope” of the legal text being negotiated.
“As a result, the FTT would have a significant impact on the future retirement income of European pensioners,” said the association in its letter.
“We believe that this contradicts and undermines many initiatives on the EU and national level to strengthen workplace pensions.”
Taxes on financial transactions ended up being taxes on savings or pensions, added PensionsEurope, and the FTT would “increase the costs, lower the returns and reduce the efficiency of the investment strategies of pension funds, which will ultimately lead to lower benefits for pensioners”.
“The FTT would have a significant impact on the future retirement income of European pensioners”
It also argued that the proposed “mutualisation” system, whereby revenues from the tax would be pooled and shared among the countries applying it, would mean that “to some extent” pension income from members in one EU country would be transferred to another country.
“This clearly cannot be the purpose of an FTT regime,” said PensionsEurope.
It called on the 10 member states to dismiss the proposal or, if the tax were to be introduced, to exempt pension funds and their assets from its application.
Insurance Europe, PensionsEurope’s counterpart for the insurance sector, said exempting pension products from the scope of the FTT was “crucial”, and distinguished this from exempting only specific types of pension providers.
In its view, it said, it would be best to leave the definition of “pension products” to be exempted to national authorities, whereby the principle of ‘substance over form’ should be observed.
“All financial institutions that provide occupational pension products should be regulated not on the basis of the legal vehicle through which the products are sold, but rather according to the benefits those products provide to beneficiaries,” the insurance association wrote.
*Belgium, Germany, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia