Late Lunchtime Links: The EU has come up with ambitious proposals for a financial transaction tax, which will seemingly bring big benefits to London

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The European Union’s Financial Transaction Tax is becoming more of a reality and less of a fanciful fantasy. The European Parliament voted today in favour of implementing a tax based upon both an "issuance principle" and a “residence principle.”

Under the issuance principle, even financial institutions located outside the EU will pay the tax when they trade securities originally issued by companies based within the EU bloc (eg. A Deutsche bank stock traded by two banks in Hong Kong would be caught). Under the “residence principle,” any institution located within the EU, will have to pay the tax whenever they trade – including if they’re trading shares issued outside the EU.

The two principles are intended to make it more difficult to avoid the tax, which the EU wants to implement by December 2013.

EU member states have a veto on tax issues and the chances of the UK agreeing to the latest proposals are approximately equivalent to the Queen abdicating to Prince Charles. As a result, two outcomes seem likely: US institutions headquartered in the UK and UK banks generally, will experience greater trading flow. EU organisations will choose to launch IPOs in London.  Trading and capital markets jobs could conceivably benefit.


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