UPDATE 2-Italy doubles planned tax on share trading

Thu Dec 13, 2012 5:27pm GMT

Related Topics

* Tax rate on share transactions raised to 0.1 pct

* Tax on derivatives trading set at up to 100 euros

* Introduction delayed by a few months

* Trading could fall 30 pct - brokers' association

By Giuseppe Fonte

ROME, Dec 13 (Reuters) - The Italian government proposed on Thursday to double the tax on share transactions, which critics said could harm equity trading in Italy to the benefit of rival financial centres such as London.

Under an amendment inserted in the 2013 budget law, share transactions will be taxed at 0.12 percent of their value from March 2013 and at 0.1 percent from 2014.

Under a previous a proposal, the levy would have started in January with a tax rate of 0.05 percent.

Italy was one of 11 euro zone countries to agree in October to introduce the tax and could become one of the first to implement it. France introduced a trading levy in August.

"The tax rate for shares is heavy," said Gianluigi Gugliotta, secretary general of Assosim, an association of 80 Italian financial institutions.

"We expect share transactions to fall by more than 30 percent and trading to move abroad."

In an attempt to stem market speculation, the rate will be higher - 0.22 percent from March and 0.2 percent from 2014 - for over-the-counter share transactions that do not take place on regulated markets.

High-frequency trading, which involves placing and then pulling multiple orders faster than the blink of an eye, will be subject to a 0.02 percent levy.

Market-makers and share trading in companies with a market capitalisation of less than 500 million euros ($654 million) will be exempt.

Trading in derivatives, excluding those used to hedge against risk, will be taxed from July 2013 depending on the type of contract and its nominal value. The amendment did not set a tax rate for this type of trade, but said the levy would not exceed 100 euros per transaction.

The Tobin tax has been pushed hard by Germany and France but strongly opposed by Britain, Sweden and others.

Critics say that it could distort the EU's single market by giving financial companies incentives to shift business to European centres where the tax is not levied - or away from Europe altogether.

The Italian proposal, which is expected to reap about 1 billion euros a year, says the tax is due regardless of where the transaction takes place, though it may be more difficult to collect it if the trade is made from outside Italy.

The levy does not apply to sovereign bonds, nor to most corporate bonds.

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