The populist 'Robin Hood’ tax, named after a
heroic outlaw in English folklore that took from the rich to
give to the poor, is being heralded as a way that the financial
services industry pays its way for the government bail-outs it
has received. But will the Financial Transaction Tax endanger
the future of UCITS?
The FTT will result in money market funds – many of
which use the UCITS wrapper – going out of business,
according to the European Fund and Asset Management
Association. EFAMA says the levy will also reduce the
attractiveness of long term savings in equity, bond and
balanced funds – many which also use the
This is because financial products that use UCITS would be hit
twice over: when investors redeem their UCITS shares/units and
when UCITS fund managers buy and sell securities or
No one can deny that the financial services sector is being
propped up directly and indirectly through trillions of dollars
of bailout cash it received from governments via taxpayers. But
expecting savers to pay, when there are negative interest rates
and the intrinsic value of their savings has declined because
of inflation, seems the wrong remedy.
Deposit accounts and life insurance saving products are not
covered by the tax and thus the move is likely only to limit
savers and stifle innovation. Hitting out at savers, directly
or indirectly, is not the solution to this conundrum.
The global financial crisis exposed governments’
desperate lack of cash. Individuals are expected to save for
their long term futures. But part of the problem with the FTT
– however well-intentioned it might be – is
that it taxes investors who have taken responsibility for their
financial future and will hinder developments in the industry
at a time when investors urgently need it.