TUAC - TRADE UNION ADVISORY COMMITTEE TO THE OECD

01/12/2011

On 31st October 2011, APG, a leading European asset manager that provides services to Dutch pension funds (EUR285bn AUM), issued a Memorandum on the impact of a Financial Transaction Tax (FTT) as recently proposed by the European Commission (EC). The Memorandum states that “current and future retiree[s] simply cannot afford to bear the additional costs that the FTT” would bring, that such taxation would “unfairly hammer their pension returns” and that it would “massively penalize the second pillar pension system of The Netherlands”. The memorandum states in rather blunt terms APG’s opposition to the FTT: “The retirement savings of many millions of European citizens simply should not become a new cash cow of Brussels. Pension funds should not be used to raise money to help bail out the struggling economies or banks”.

The Trade Union Advisory Committee to the OECD (TUAC) and the International Trade Union Confederation (ITUC) support the creation of an FTT. At the same time, the TUAC, the ITUC and their affiliated national confederations are attentive to the views of the pension fund industry and their asset managers. While trade unions primarily represent the interests of workers as employees, they are also, in many countries investors through their long term savings in pension schemes. Trade unions support sustainable and responsible investment policies by pension funds that ensure workers’ right to decent, adequate, secured and predictable retirement pensions. At the international level, trade unions engage with pension funds and pension fund trustees via the Global Unions’ Committee on Workers’ Capital.

The aim of an FTT is to curb short-term financial speculation and provide vital sources of government revenue. It is important that the cost of the FTT is not be borne by working families, including retirees and that any FTT be designed or accompanied by regulatory measures that mitigate the impact on workers’ pension rights and on retirees’ pensions. This could be ensured through ex-ante impact assessment studies to shape the initial design of the FTT. However, given the lack of statistical information on pension funds’ portfolio composition on a global, OECD or EU-wide scale, the potential of this approach is limited. Accordingly ex ante impact assessments would be usefully complemented by ex-post periodic reviews in the implementation phase of an FTT.

We disagree with the views expressed by APG in its memorandum. In our view a carefully designed tax – in the range that the EC is proposing – would make sense. We set out our response to APG’s key arguments against the FTT.

Read our full response here.