Friday Observation. Money Matters

Friday observation :) This time about money matters. For quite some time an idea has been circulating in the European Commission committees about a Financial Transaction Tax (FTT). The original idea was to tax all financial transactions, including payments (e.g. utility bills). After making its way through the long and winding corridors of Brussels, the idea became much flatter and would only tax stock/bond transactions and derivative instruments. So, unlike other taxes and duties, this time it would tax transactions, not only the profit gained but also losses. As one might suspect, the flagbearer of the idea is France, but among the 11 supporting countries Estonia also features, in last place on the list. It comes as no surprise that the European financial mecca, Great Britain, which incidentally already has some kind of duty - called "stamp duty" - categorically objects to this idea.

But the story this time is about pensions. Some time ago, employed persons had a certain surprise when opening the projected pension statement on the latvija.lv portal and seeing that the future pension would be a mere 30 Ls/month. The more honest salary earners placed certain hopes on pension tier 2, the less honest - on tier 3. Be that as it may, both pension funds earn profit by forming investment exposures in financial markets, which the European Commission now intends to tax. As one might guess, pension fund holders will choose to invest in lower-yielding but steadily growing companies. The good news is that the funds will become more stable; the bad news is that less will be invested in risk/innovation transactions, which could potentially yield greater profit. In other words - the rich will get richer, the poor - poorer. Oh, and the naivety of Brussels cabinet plankton that the newly introduced duty will be paid by businesses, not clients. :)

Have a lovely weekend!

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