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

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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


Implementation technical and legal aspects prof mr l a denys

CurrencyTransactions Tax

Implementationtechnical and legal aspectsprof. Mr. L.A. Denys


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)


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

  • 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


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

  • 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


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

CurrencyTransactions Tax


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