3 Min Read
* Collection bill could fall as scope of tax cut
* Clearing houses in non-participating countries in spotlight (Adds more detail on costs, market-making)
By Huw Jones
LONDON, Oct 19 (Reuters) - Collecting a long-awaited EU tax on financial transactions could cost up to 8 million euros ($8.8 million) in Germany alone, a European Union document showed on Wednesday.
Ten EU countries, including Germany, want to tax stock, bond and derivatives transactions as a way for the financial sector to raise funds after the huge taxpayer bailouts it received during the financial crisis.
The financial industry has been waiting to see how the financial transactions tax (FTT) would be collected and the likely costs.
The EU document includes the findings of an unpublished study by consultants Capgemini for Germany's finance ministry which showed that total costs for financial institutions in the first year would be an estimated 7.75 million euros, but would then fall.
"In the long term, the personnel and material costs might not exceed 1.6 million euros," the EU document seen by Reuters said.
The EU executive was asked last week by the 10 countries backing the tax to come up with a new proposal that will cut back on the type of transactions that will be covered initially, which would bring down the cost of implementing the levy.
The document said that Austria had estimated its implementation costs would be less than a million euros.
Italy and France have already introduced a transaction tax, and collection costs for their national levies amount to 250,000 euros and 21,000 euros, respectively, the document said. Slovenia estimates its costs would range from 1.5 to 2 million euros. Germany would face much higher initial costs because trading volumes are much higher.
Using existing clearing and settlement houses to collect the tax wouldn't be enough to capture all transactions and hence revenue, meaning financial firms would also have to build up their own collection systems, it added.
"To cover all transactions taxed by a future FTT anyhow, a system of self-assessment by financial institutions will have to be put in place, either as an addition to a centralised system or as the core system of tax collection," the document said.
"An adequate level of legal enforcement of the tax in each participating member state needs to be ensured."
Some clearing houses will not be in countries applying the tax and "would need a commercial incentive" to calculate how much tax should be paid, the document said.
"It could be an incentive for foreign market infrastructures to behave compliant in order to avoid the liability of their customers."
Britain, home to the EU's biggest stockmarket which trades shares listed across the bloc, is not participating in the tax.
It was impossible to assess the costs of setting up a new "utility" to collect the FTT, which was first proposed by Germany and France in 2012 but has missed several deadlines for implementation due to concerns over its application and impact.
$1 = 0.9107 euros Reporting by Huw Jones; Editing by Rachel Armstrong and Susan Fenton