These include increased transaction costs, lower trading volumes, lower asset prices, and higher capital costs, which will favor operations outside regulated markets. FTTs can introduce a variety of distortions into capital markets. The FTT’s adverse effects on the capital market may end up costing more than its collection. The Spanish government expects this new tax to generate additional revenue of €850 million ($1 billion) annually, while the Independent Authority for Fiscal Responsibility (IAFR) has a lower estimate of €420 million ($492 million). For example, if an investor sells an asset worth $1,000, they would be charged $2 on the transaction under a 0.2 percent FTT. Under a FTT, a percentage of the asset’s value is paid in taxes when it is traded. In general, FTTs are levied on the trade of financial instruments such as stocks, bonds, or derivatives.
The FTT is a 0.2 percent tax on the purchase of shares of Spanish companies with a market capitalization of more than €1 billion (US $1.17 billion). Both taxes will go into effect in January 2021, three months after their publication in the Spanish Official Gazette. Spain’s upper house passed two major tax bills today: the financial transaction tax (FTT) and the digital service tax (DST).
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