Ecosocial Forum Europe Conference A New Basis to Finance International Duties VIENNA JUNE 2006

1. Ecosocial Forum Europe Conference A New Basis to Finance International Duties VIENNA JUNE 2006

2. CurrencyTransactions Tax Implementationtechnical and legal aspectsprof. Mr. L.A. Denys

3. Context: THE GLOBAL FOREIGN EXCHANGE MARKET equals forex trading : • annual forex turnover : 400.000 à 500.000 billion $ = one year • daily forex turnover : +2.000 billion $ = one day • world financial assets : 120.000 billion $ • world gdp : 40.000 billion $ = one month • world trade (goods & services) : 10.000 billion $ = one week • official development assistance (2004) : 70 billion $ = 15 minutes • Mill. Development Goals needs (2006) : 135 billion $ = 30 minutes • Mill. Development Goods needs in 2015 : 195 billion $ = 45 minutes ! Austria 2000 billion €

4. Context: THE GLOBAL FOREX MARKET (cont’d) • annual turnover : 400 à 500.000.000.000.000 $ • daily forex turnover : 2.000.000.000.000 $ • average value per transaction (payment instruction) : 10.000.000 $ (200 to 500 million $ per transaction is not abnormal) • price setting : 20 times per minute exchange rate can alter several thousand times a day • 40 % transactions concluded in 3 days • 80 % transactions concluded within a week

5. Context : THE GLOBAL FOREX MARKET (cont’d) • market share : 80 % in 11 financial centers • London City : 33 % • US : 18 % • Japan : 9 % • Singapore : 7 % • Germany : 5 % • Switzerland : 4 % • Hongkong : 4 % • France : 4 % • remaining 18 % : 8 countries account for 14 %

6. Context : THE GLOBAL FOREX MARKET (cont’d) • market share : 90 % in 7 currencies • US $ : 45 % • € : 19 % • Yen : 11 % • £ : 8 % • Sw F : 3 % • CN$ : 2,3 % • AUS$ : 2,1 %

7. Context : THE GLOBAL FOREX MARKET (cont’d) • worldwide market makers : 20 • banking system : • UK : 17 banks have 75 % market share • US : 13 banks have 75 % market share • 10 ww- banking groups have 50 % market share

8. CTT : Estimated Potential Revenue • globally : + 50 to 200 billion $ • EU & Switzerland : 0,01 to 0,02 % = 17-20 to 30-40 billion $ • UNU – Wider report : +/- 30 billion $ • EU-commission estimates revenues at 0.01 % = 15 billion €

9. Currency Transactions Tax • legistic inspiration of draft treaty • indirect tax on transactions Residence / source / origin / destination irrelevant ? Market tax mechanism • taxable transactions exchanges of currencies financial instruments having equivalent effect • taxable event : payment – settlement • location : parties / intermediaries / currency • taxable persons / tax liability Intermediary MN O – single entity Reverse charge - joint liability • tax rates (minimal) normal rate on all transactions within bandwidth (e.g. Belgium 0,02 %) (dissuasive) surcharge only on transactions with one currency in excessive fluctuation (e.g. Belgium 80 %) • taxation at wholesale level (settlement)

10. CTT is a « GLOBAL » tax • treaty based • global tax base • global localisation • avoiding international double taxation • foregoing international tax avoidance ; simplicity – compliance costs (transactions costs) - minimal rate and world global wholesale financial market & legal security risk • collection through global architecture of financial sector supervised by Central Bank / Prudential supervision, (payment settlement, CLSB) MNO • local implementation (administration enforcement), global administrative & judicial monetary cooperation • funding of global public goods : redistribution of resources / democratic allocation of funds • tax burden on labour & household consumption vs capital (quid other capital markets)

11. Taxation at wholesale level • central Banks control legal tender (national payment systems) • settlement institutions & CLS • Provided by Central Banks • Groups 70 fin. org. instit. & serves + 480 fin. memb. cust. • Aims at 80 % market share • prudential supervision • intra MNO transactions : • Single entity – consolidated approach • External auditing • reverse taxation ; joint liability • ML – legislation ; EU financial interest

12. Tax avoidance & evasion : • delocalisation, deferral, substitution • payment and settlement system ; world financial architecture • joint liability ; reverse charges • single entity – approach MNO’s • external auditors role • International cooperation in • administrative tax control and collection tax • financial police and judicial enforcements • money laundering regulations & Financial Intelligence Units

13. Unilateral European Ctt Law 1. PROCEDURE • shared competence in tax matters MS can introduce ; EU can harmonize unanimity at EU required ; Enchanced cooperation possible ; min. 9 • shared competence in development policy • in Eurozone : monetary surcharge exclusive EU competence ; Cooperation ECB • preferably : EU – Directive and Member State implementation (administration)

14. Unilateral European CTT law 2. SUBSTANCE • concurrence of EU and CTT objectives • principles of internal market non discriminationvs. Justified distinction and acceptable fiscal disparity (CTT = distinct financial market (value fluctuation risk) with global economy benefits ; coexistence of Euro and other currencies in principle acceptable) free movement of capital, e.a. - Global and neutral tax base - Low rate : no market distortion - Justifications : development policy and monetary policy • EC Commission Reports 2002 - 2005

15. CurrencyTransactions Tax