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Ecosocial Forum Europe Conference A New Basis to Finance International Duties VIENNA JUNE 2006. Currency Transactions Tax. Implementation technical and legal aspects prof. Mr. L.A. Denys. Context: THE GLOBAL FOREIGN EXCHANGE MARKET.

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ecosocial forum europe conference a new basis to finance international duties vienna june 2006
Ecosocial Forum Europe

Conference

A New Basis to Finance International Duties

VIENNA JUNE 2006

context the global foreign exchange market
Context: THE GLOBAL FOREIGN EXCHANGE MARKET

equals forex trading :

  • annual forex turnover : 400.000 à 500.000 billion $ = one year
  • daily forex turnover : +2.000 billion $ = one day
  • world financial assets : 120.000 billion $
  • world gdp : 40.000 billion $ = one month
  • world trade (goods & services) : 10.000 billion $ = one week
  • official development assistance (2004) : 70 billion $ = 15 minutes
  • Mill. Development Goals needs (2006) : 135 billion $ = 30 minutes
  • Mill. Development Goods needs in 2015 : 195 billion $ = 45 minutes

! Austria 2000 billion €

context the global forex market cont d
Context: THE GLOBAL FOREX MARKET (cont’d)
  • annual turnover : 400 à 500.000.000.000.000 $
  • daily forex turnover : 2.000.000.000.000 $
  • average value per transaction (payment instruction) :

10.000.000 $

(200 to 500 million $ per transaction is not abnormal)

  • price setting : 20 times per minute

exchange rate can alter several thousand times a day

  • 40 % transactions concluded in 3 days
  • 80 % transactions concluded within a week
context the global forex market cont d1
Context : THE GLOBAL FOREX MARKET (cont’d)
  • market share : 80 % in 11 financial centers
    • London City : 33 %
    • US : 18 %
    • Japan : 9 %
    • Singapore : 7 %
    • Germany : 5 %
    • Switzerland : 4 %
    • Hongkong : 4 %
    • France : 4 %
    • remaining 18 % : 8 countries account for 14 %
context the global forex market cont d2
Context : THE GLOBAL FOREX MARKET (cont’d)
  • market share : 90 % in 7 currencies
    • US $ : 45 %
    • € : 19 %
    • Yen : 11 %
    • £ : 8 %
    • Sw F : 3 %
    • CN$ : 2,3 %
    • AUS$ : 2,1 %
context the global forex market cont d3
Context : THE GLOBAL FOREX MARKET (cont’d)
  • worldwide market makers : 20
  • banking system :
    • UK : 17 banks have 75 % market share
    • US : 13 banks have 75 % market share
  • 10 ww- banking groups have 50 % market share
ctt estimated potential revenue
CTT : Estimated Potential Revenue
  • globally : + 50 to 200 billion $
  • EU & Switzerland : 0,01 to 0,02 % = 17-20 to 30-40 billion $
  • UNU – Wider report : +/- 30 billion $
  • EU-commission estimates revenues at 0.01 % = 15 billion €
currency transactions tax
Currency Transactions Tax
  • legistic inspiration of draft treaty
  • indirect tax on transactions

Residence / source / origin / destination irrelevant ?

Market tax mechanism

  • taxable transactions

exchanges of currencies

financial instruments having equivalent effect

  • taxable event : payment – settlement
  • location : parties / intermediaries / currency
  • taxable persons / tax liability

Intermediary

MN O – single entity

Reverse charge - joint liability

  • tax rates

(minimal) normal rate on all transactions within bandwidth (e.g. Belgium 0,02 %)

(dissuasive) surcharge only on transactions with one currency in excessive fluctuation (e.g. Belgium 80 %)

  • taxation at wholesale level (settlement)
slide10

CTT is a « GLOBAL » tax

  • treaty based
  • global tax base
  • global localisation
  • avoiding international double taxation
  • foregoing international tax avoidance ; simplicity – compliance costs (transactions costs) - minimal rate and world global wholesale financial market & legal security risk
  • collection through global architecture of financial sector supervised by Central Bank / Prudential supervision, (payment settlement, CLSB) MNO
  • local implementation (administration enforcement), global administrative & judicial monetary cooperation
  • funding of global public goods : redistribution of resources / democratic allocation of funds
  • tax burden on labour & household consumption vs capital (quid other capital markets)
taxation at wholesale level
Taxation at wholesale level
  • central Banks control legal tender (national payment systems)
  • settlement institutions & CLS
    • Provided by Central Banks
    • Groups 70 fin. org. instit. & serves + 480 fin. memb. cust.
    • Aims at 80 % market share
  • prudential supervision
  • intra MNO transactions :
    • Single entity – consolidated approach
    • External auditing
  • reverse taxation ; joint liability
  • ML – legislation ; EU financial interest
slide12
Tax avoidance & evasion :
    • delocalisation, deferral, substitution
    • payment and settlement system ; world financial architecture
    • joint liability ; reverse charges
    • single entity – approach MNO’s
    • external auditors role
  • International cooperation in
    • administrative tax control and collection tax
    • financial police and judicial enforcements
    • money laundering regulations & Financial Intelligence Units
unilateral european ctt law
Unilateral European Ctt Law

1. PROCEDURE

  • shared competence in tax matters

MS can introduce ; EU can harmonize

unanimity at EU required ;

Enchanced cooperation possible ; min. 9

  • shared competence in development policy
  • in Eurozone : monetary surcharge exclusive EU competence ;

Cooperation ECB

  • preferably : EU – Directive and Member State implementation

(administration)

unilateral european ctt law1
Unilateral European CTT law

2. SUBSTANCE

  • concurrence of EU and CTT objectives
  • principles of internal market

non discriminationvs. Justified distinction and acceptable fiscal disparity

(CTT = distinct financial market (value fluctuation risk) with global economy benefits ; coexistence of Euro and other currencies in principle acceptable)

free movement of capital, e.a.

- Global and neutral tax base

- Low rate : no market distortion

- Justifications : development policy and

monetary policy

  • EC Commission Reports 2002 - 2005
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