UK Markets closed

Germany, Belgium consider transaction tax impact on economy

(Adds more detail, background)

By Huw Jones

LONDON, Sept 22 (Reuters) - Germany and several other euro zone states that have pledged to tax financial transactions from 2017 want to curb the impact on savers and on how markets fund the economy, documents showed on Tuesday.

Eleven euro zone countries are planning to introduce the financial transaction tax (FTT) on stock, bond and derivatives trades, but there are worries the move could crimp the ability of markets to fund the economy.

"One could try to assess whether it is possible to identify transactions which are directly linked to the risk hedging activities of real economy enterprises," a discussion paper written by Germany, Belgium, Spain and Portugal for a Sept. 29 meeting said.

"This would give the opportunity to treat these specific transactions differently from other transactions," said the document, seen by Reuters.

In a separate paper for the same meeting and written by Germany, Belgium, Estonia, Spain and Slovakia, they outline ways to stop the tax from altering the way pension funds would invest and potentially making them less attractive to savers.

Pension funds typically change their portfolios regularly to mitigate risks and get the best returns for their customers.

But the tax as proposed could "encourage" a passive "buy and hold strategy" and "discourage" an active "beat the market" strategy, the document said.

Insurers offer similar savings products to pension funds, the document said.

"Hence, a tax burden from FTT would also decrease the income or the ability to manage appropriately these funds."

EU Economics Commissioner Pierre Moscovici said this month that political agreement on the tax is "within reach".

Germany and France proposed the FTT in 2012 in the midst of the euro zone debt crisis. As much a political symbol as an effort to correct the excesses blamed for the worst financial turmoil in decades, the FTT has been debated ever since, delaying the original 2014 start date.

There has already been a push to limit the tax's impact on sovereign debt markets.

Critics have said the levy could hamper a core policy of the EU to establish a "capital markets union" to encourage more funding for the economy to come from markets rather than banks. (Reporting by Huw Jones; Editing by Mark Heinrich)