Debt Office rejects proposal for tax on financial transactions

19 December 2011

The Swedish National Debt Office rejects the EU Commission’s proposal for a tax on financial transactions. The proposal is particularly poorly analysed and motivated. A transaction tax would have serious effects on the functioning of the Swedish financial market.

This applies particularly to the government securities markets, where the basic conditions for secondary trading would more or less disappear, the Debt Office writes in a response to the Ministry of Finance. This would diminish the possibilities of financing the central government debt at a reasonable cost.

Similar effects would occur in the market for mortgage bonds, leading to an increase in bank borrowing costs and thus the cost of mortgages.

Many financial services would become more expensive if a transaction tax was implemented, as trading in key markets would become difficult or dry up completely. Those who would ultimately be affected by this would be those who use these services, i.e. savers, investors, policyholders, borrowers etc.

The proposal is fundamentally misguided in that it identifies transactions as such as a source of financial instability. If the aim is to counter the more general risks in the financial system, an approach based on taxes (or fees) that are directly related to the risks of an institution would be more efficient.

For more information, please contact:
Linda Rudberg, press and public relations officer , +46 8 613 45 38

The Debt Office's response to the Ministry of Finance