MILAN Oct 11 Italy's government could raise 1 billion euros a year from a tax on financial transactions but the levy risks hurting small investors more than speculators, the head of an Italian brokers' association said.
Italy and 10 other euro zone countries agreed this week to press ahead with the levy, which according to a European Commission proposal is set to be 0.1 percent on the trading of bonds and shares and 0.01 percent for derivatives deals.
The European Commission has said the tax could raise up to 57 billion euros ($74 billion) a year if applied across all 27 EU countries from 2014.
Details on how the tax would work are still sketchy and it may take two years before the necessary legislation is in place.
The initiative has been pushed hard by Germany and France but strongly opposed by Britain, Sweden and others. Critics say it could distort the EU's single market by giving financial companies incentives to shift business to European centres where the tax is not levied - or away from Europe altogether.
The head of Assosim, an association of 80 Italian financial institutions, said on Thursday that based on a similar levy already in force in France, annual revenues from the so-called "Tobin Tax" would likely be no more than around 1 billion euros in Italy.
"It would only raise a modest amount here and it would hurt small savers and pension funds most, not banks or hedge funds," Gianluigi Gugliotta, secretary general of Assosim, told Reuters.
"Brokers will simply pass on the tax to their customers, which in Italy are mostly retail investors."
Gugliotta said that if the aim of EU authorities was to discourage high-frequency trading, which involves placing and then pulling multiple orders faster than the blink of an eye, the tax risked being ineffective.
"If the tax is applied on the trading balance at the end of each day, then speculators who place a lot of orders but only execute a fraction of them would mostly avoid paying," he said.
He said the association was instead proposing a tax on orders which are cancelled if they surpass a certain rate. (Reporting by Silvia Aloisi; editing by Andrew Roche)