EU’s Transaction Tax might also be applied to spot forex trades


A newly issued legal opinion ‘does not exclude’ spot forex transactions from the planned transaction tax.

Reuters reports that EU lawyers have requested and received a legal opinion that taxing spot forex transaction does not conflict with the EU’s commitment to the free movement of capital.

Attempts to introduce a global or pan-EU transactions tax have failed, mainly due to opposition from countries like the United States, Sweden and the UK. However 11 EU countries, led by Germany and France, are working toward a scaled back transaction tax outline deal by this May.

Reuters does point out the spot forex will not be included in the current round of proposed transaction tax, but very well may be included in the future. European authorities view the Transaction Tax as a way to defeat high frequency trading, as well as a way to recoup some of the money they put into bank bailouts at the end of the last decade.

As far as the Forex and CFD worlds go — it was roundly assumed that a ‘trading tax’ such as the one proposed would be good for industry, as traders would leave ‘traditional’ instruments trading for tax-less Forex and CFD trading. But if the transaction tax hit Forex and CFDs, especially given the highly leveraged nature of trading, that advantage would quickly reverse itself and become a major impediment to leveraged trading. when profit and loss is measured in pips, even a small transaction tax would eat up a lot of potential profit from trading Forex.

To see the complete Reuters article on the topic click here.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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EU's Transaction Tax might also be applied to spot forex trades

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