Europe scaleback of Financial Transactions tax – bad for the FX / CFD sector?

European governments likely to drastically cut the Financial Transactions Tax and delay its full rollout.

As first reported by…. Reuters is indicating that European countries placing a tax on financial transactions are set to drastically scale back the tax by as much as 90%, to just 0.01% of the value of a trade, from 0.1% in the original Brussels blueprint. (Meaning, for example, that a $100,000 stock trade would trigger a $10 tax, instead of $100 — a huge difference!). The tax differs country by country, with only 11 EU countries enacting it so far, although those include some of the largest EU countries including Germany, France, Italy and Spain.

We recently reported that the initial implementation of the Financial Transactions Tax in certain European countries, such as Germany and France, had a very beneficial effect on FX and CFD trading. For example, France FX and CFD trading increased by more than 20% in 2012 (a slow year elsewhere), after budget-strapped France was the first European country to introduce a 0.2% transaction ‘Stamp-Tax’ levy on financial transactions. Many traders in France have avoided the tax by switching to FX and CFDs, which allow them to trade without actually owning the shares, thereby avoiding the tax.

Removing (or drastically cutting) the tax is likely to have the opposite effect on CFD trading.

For the full Reuters article, which provides a good review of the Financial Transactions Tax, click here.

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

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