Consultation on taxing the financial services sector

They ask specific questions including whether the financial services sector, being exempt from VAT, is under taxed or over taxed. They identify two possible taxes.

1. At a global level, a Financial Transactions Tax (FTT) could help fund international challenges. The FTT could tax every transaction, generally speaking, based on its transaction value. If the FTT is well implemented and globally applied, it could be a way to raise large funds. The European Commission will support further exploration and development of the FTT within the G20.
   
2. At European Union (EU) level, the European Commission considered that in principle there is greater potential for a Financial Activities Tax (FAT), a tax on profits and wages. If carefully designed and implemented, an EU FAT could generate significant revenues, without posing undue risk of relocation.

The European Commission has stressed that it’s not limited to the above two options and will consider other suggestions from those who respond.

For further information, contact:

Tom Moore, Partner
Tel: 020 7566 3817
E: tmoore@kingstonsmith.co.uk