The introduction of an FTT either at sub-EU or individual Member State level is likely to have practical implications for financial sector businesses whether or not based in the taxing jurisdiction or jurisdictions concerned. The biggest impact is likely to be on systems, products and processes. Analysis already carried out by KPMG member firms on the European Commission’s FTT proposal demonstrates that certain business areas or markets may at best require changes to business models and at worst be no longer viable. For example, the proposal could impact on processes such as securities settlement, on intermediation functions, or on access to market liquidity. Given the nature of the financial sector business a key concern on introduction of an FTT will be the compliance implications, such as reporting and payment obligations.
To understand the implications requires a thorough understanding of the relevant rules as they apply to a particular business. Applying our technical understanding of the rules and experience of working with the financial sector we are able to analyze clients’ business models to help them understand the practical and financial implications of the tax and to develop strategies for dealing with such implications. This typically requires an analysis of transaction type, product portfolio and the financial institution’s trading activities. Not only does our infrastructure allow us to ensure KPMG member firms are kept aware of all the latest developments but this also enables them to ensure their clients benefit directly from this.
How quickly FTT legislative initiatives may be adopted and implemented is difficult to predict. However experience with bank levies shows that the process can be fast. The French FTT that came into force on August 1, 2012 was only tabled on February 29, 2012. There are also clear incentives for those Member States that support the principle of FTT’s to act quickly, both in terms of revenue generation as well as achieving the underlying economic aims. The European Commission’s proposed implementation date was 1 January 2014. Although this date has proved unattainable and there are ongoing political discussions regarding the future of the proposal, businesses will need to understand the possible scenarios and their potential impact in order to take the necessary action if and when necessary.
KPMG member firms combined with the FTT support unit have the business understanding as well as the tax expertise to understand the implications of financial transaction taxes across the EU and to communicate these to clients, putting clients in control and enabling them to take the appropriate decisions and actions.
For more information contact your local KPMG advisor.