Interactive Data service aims to untangle transaction tax eligibilities
Market data vendor Interactive Data has responded to the introduction of Financial Transaction Taxes in France and Italy with a new service that supports the identification of instruments that are likely to be subject to them.
While politicians have been trumpeting the levies – also known as Tobin or Robin Hood taxes – as applying to all transactions, the reality is more complex.
In France, for instance, the proposal it to levy the tax on equity instruments issued by French domiciled companies on the ‘official’ list published by the Finance Ministry, based on firms with a market capitalisation of more than €1 billion. Interactive Data analysis reckons that currently equates to around 700 securities – not issuers.
In Italy the FFT affects certain instruments issued by firms that had an average market cap of more than €500 million during November 2012. The instruments affected are equity or ‘equity-like’ instruments as well as derivatives – “(swaps, futures, options, cash notional forward agreements and credit default swaps, having as a main underlying, or the value of which is mainly linked to a security (including warrants, covered warrants and certificates), regardless of whether they are physically or cash settled)”.
Whether either of these approaches will match the European rules that are due to come in on 1 January 1, 2014 is also unclear. Austria, Belgium, Estonia, Germany, Greece, Portugal, Slovakia, Slovenia and Spain have agreed to the rules in principal, but they may end up being re-written or amended.
“The Financial Transaction Taxes represent an operational challenge for financial institutions due to the complexities of identifying securities in scope and determining the level of tax on those instruments,” said Anthony Belcher, director pricing and reference data at Interactive Data EMEA. “Our new service enables firms to determine the securities that may fall under the scope of the transaction tax within each jurisdiction while removing the need to maintain these lists themselves.”
The Interactive Data service compiles a list of instruments meeting the market capitalisation, location of issuer and other criteria specified in the French and Italian FTTs. This information is updated on a daily basis to reflect instrument level changes and additions, including those arising from corporate actions such as rights issues.