Against the backdrop of the Administration's proposed fiscal responsibility fee, SIFMA and the Investment Company Institute have voiced their strong opposition to the imposition of a financial transactions tax as part of any budget deficit reduction legislation or G-20 mechanism. In a joint letter to Treasury Secretary Tim Geithner, the SIFMA and the ICI, joined by the Chamber of Commerce, the Financial Services Forum, and the Business Roundtable, urged the Treasury Secretary to continue to encourage other members of the G-20 to resist pressures to adopt such proposals on a global basis.
The industry groups are concerned with the French and German effort to seek endorsement of such a tax through the G-20 mechanism. The G-20 members have committed to work together to support policies that will lead to strong, sustainable and balanced growth, said the industry groups, and the imposition of a financial transaction tax would run counter to achieving these objectives.
The case against the imposition of such a tax is strong, said the groups, since a financial transactions tax will cycle through the entire U.S. economy, harming both investors and businesses. The financial transactions tax, which generally includes derivatives transactions, would impede the efficiency of markets, noted SIFMA and the ICI, impair depth and liquidity, raise costs to issuers, investors, and pensioners, and distort capital flows by discriminating against asset classes. Major economies that have adopted a FTT and FTT-like initiatives have had overwhelmingly negative results, said the groups, including reduced asset prices, trading moving to other venues, market dislocation, and a decrease in liquidity.