Two years after the introduction of the Tax on Financial Transactions in Spain, which occurred in January 2021, the regulator has issued a report in which, basically, it explains that the new taxation -following the line adopted by other European countries- it has caused a slight deterioration in the liquidity of the affected companies (those that capitalize more than 1,000 million euros), with a rise in volatility in the short term (but not in the long term) and could have displaced part of the OTC trading to markets subject to MiFID regulation.
The Government introduced in mid-January 2021 what is popularly known as Tobin tax which consisted of applying a tax of 0.20% to operations to purchase shares of companies with a capitalization of more than 1,000 million euros. In 2022 this rate affected the trading of 57 companies. Falls in the equity market led to a reduction in this figure in 2022 to 52 companies listed on the Spanish stock market. It does not affect intraday operations in any case.
The National Securities Market Commission (CNMV) has published a report on Tuesday in which it analyzes the impact of the application of the ITF on the negotiation of the affected companies in this two-year period. The conclusions, grosso modo, indicate a very limited impact of this tax on the fifty firms taxed. “The results of the empirical analysis indicate that In the short and medium term, the tax does not seem to affect spreads bid-ask (lower sales order and the highest purchase order)”, points out the regulator. “On the other hand, evidence is observed that the introduction of the tax contributed to significantly reduce the trading of the shares that were affected by it (…) Thus, after the application of the ITF there would have been a slight deterioration in liquidity“, continues the CNMV in its letter.
Similarly, experts have seen how volatility increased only in the short term and note how “an appreciable part of OTC trading could have been displaced (over the counterfor its acronym in English, which are over-the-counter markets where financial instruments are traded in a B2B relationship, without intermediaries) to markets subject to MiFID regulation”.
“For more than a decade, a group of European Union countries, within the framework of enhanced cooperation, has promoted the implementation of a tax on financial transactions (hereinafter, ITF) in a harmonized manner,” says this document endorsed by the CNMV. “However, despite the progress made in the configuration of the tax, an agreement has not been reached at the European level that results in a directive. This lack of agreement has led several countries, such as Italy or France, to introduce their own version of the FTT in their national laws”, conclude the experts.
A collection ‘mirage’
Little by little, the Socialist Executive has moderated its optimism about the money it expected to raise through the new tax on financial transactions. The initial objective for the 2021 financial year was to enter 850 million euros per year, but it has never even come close to this figure.
The first year of its implementation, the Government received 35% of what was expected, with 296 million euros, according to the annual collection data from the Tax Agency.
The 2022 budgets lowered the forecast to 372 million euros, less than half of what was planned when the tax figure was created. But it will not come close to this figure either, in the absence of knowing the data for the month of December. According to the data collected up to November from the Tax Agency, the State would have collected 284.7 million euros in this way, 23.5% less, difficult to cover in December, taking into account that practically the liquidity of the market it disappears from the second fortnight, prior to the Christmas holidays.
In total, over the two years (and lack of the aforementioned month of December) since its implementation, the tax on financial transactions has reported to the State additional income of 580.7 million euros, 68.3% of the total planned only for the initial year, in 2021, of 850 million euros.