Fisco publishes study on barriers to cross-border securities trading

The European Commission’s Clearing and Settlement Fiscal Compliance expert group (Fisco) has issued a fact-finding study examining EU fiscal compliance procedures for clearing and settlement of cross-border securities transactions. The study analyses how these procedures hinder the functioning of capital markets and increase the cost of cross-border settlements, particularly in relation to withholding and transaction taxes. The Fisco group will issue a further report proposing solutions by early 2007.

According to the EC, the study will help identify procedures that are current barriers to more efficient pan-European securities trading in the EU, an area needing further work to facilitate financial market integration.

Main conclusions of the study include focus on withholding tax procedures and transaction tax procedures.

Withholding tax procedures:
• Withholding tax collection and relief procedures vary considerably among Member States. Different procedures often apply even to different classes of securities within the same Member State.
• The complexity and administrative costs resulting from these differences may lead investors to forgo the relief to which they are entitled and may discourage cross-border investment for the same reason.
• In several cases, procedural tax rules often prevent foreign intermediaries from obtaining direct access to the local Central Securities Depository (CSD), or at least do not allow them to obtain access under conditions similar to those applicable to local intermediaries.

Transaction tax procedures:
• Tax rules that impose tax collection responsibilities on settlement service providers do not always take into account the fact that securities transactions may be handled by several local or foreign settlement service providers. These rules do not allow all settlement service providers to collect transfer taxes under similar conditions.
• This issue may put certain settlement service providers at a competitive disadvantage in comparison with others.

Click here to see the study.BaselAlert.com