US Lawmakers' Turn to Propose Financial Transaction Tax
US Senator Tom Harkin and Member of House of Representatives Peter DeFazio, both Democrats, have introduced bills in both sides of the United States Congress to place a financial transaction tax (FTT) on trading activities undertaken by banking and financial firms, with effect from January 1, 2013.
The proposal would place an FTT of 0.03% on most non-consumer financial trading transactions, including stocks, bonds and other debts, except for their initial issuance. The tax would also cover all derivative contracts, options, puts, forward contracts, swaps and other complex instruments at their actual cost, but would exclude debt that has an original term of less than 100 days.
This compares with the proposed European Union FTT, which, from January 1, 2014, would be levied on the exchange of shares and bonds at a rate of 0.1% and on derivative contracts at a rate of 0.01% (Refer to 29.09.2011 and 13.10.2011 for similar proposals in EU).
Kenneth Bentsen, executive vice president, public policy and advocacy, confirmed that SIFMA remained opposed to the idea of imposing an FTT. "It's important to be clear about the economic and financial impact of such a tax not just on markets, but on investors. An FTT is essentially a sales tax on investors. At a time when we face a slow economic recovery, such a tax will impede the efficiency of markets and impair depth and liquidity as well as raise costs to the issuers, pensions and investors who help drive economic growth.”
"Major economies that have adopted such taxes have had overwhelmingly negative results, including reduced asset prices, trading moving to other venues, market dislocation and decreased liquidity," he added. “We encourage Congress and the Administration to continue to resist efforts to implement such a tax."