EFAMA has warned that the UCITS brand would lose its competitive edge under the proposed financial transaction tax (also referred to as the Tobin tax) and cause investors to seek alternative investment opportunities. EFAMA said that the European Commission’s proposed transaction levy would have a major detrimental impact on the UCITS industry, its clients and the European economy. EFAMA has calculated that if the FTT had been applied at the start of 2011 the annual total impact of the tax would have reached EUR38billion, of which investors would have paid an estimated EUR15billion on the sales and redemptions of UCITS shares/units. The tax, unveiled by Jose Barroso in September 2011 would see financial institutions charged a 0.1 per cent levy on transactions with other financial institutions. The proposed date of introduction is 1 January 2014. Of course, being Europe’s leading financial centre, London would be hit the hardest were it to come into effect.
Director General of EFAMA, Peter de Proft (pictured), said that EFAMA hoped its analysis would help raise public awareness of “the extremely detrimental impact”. “It is clear that the FTT would put money market funds out of business and reduce the attractiveness of savings in equity, bond and balanced funds, thereby reducing an important source of long-term financing for the European economy,” said de Proft, adding that retail and institutional investors would switch their savings away from UCITS and towards savings deposits and life insurance products that aren’t covered by the FTT in the Commission’s proposal. Reducing the investment choices available to EU citizens, would, said de Proft, “be totally unjustified in light of the reputation that UCITS has acquired as a model of excellence in the long-term savings market”.