Corporate borrowers obliged to issue shares
Tax regime, which has served as the basis of the Eurobond market since its inception 50 years ago, may undergo fundamental restructuring, forcing corporate borrowers to issue shares rather than obtain bank loans, RBC-Ukraine reports.
This year Eurobond sales reached $4 trillion, which is comparable with a record amount of $4.5 trillion. in 2009. Europe's corporate lending in the first half year fell 8.7% to $379 billion compared to late 2012, and by 37% compared to a record $598 billion in the first half of 2011.
Eurobond market may face its biggest challenge, after lawmakers establish new rules to protect taxpayers after the biggest financial crisis since the Great Depression that has forced governments to help creditors.
At the same time, the number of dollar-denominated bonds owned by international investors has increased by 7.4% to $ 4.5 trillion this year, while the proposed tax on financial transactions may reduce demand.
"We are greatly concerned about a tax on transactions because they may affect liquidity", says John Pattullo, manager of $4.67 billion as head of department of the market instruments with fixed income at Henderson Global Investors.
Banks can further reduce volume of trading following the EU plans to impose a tax in the amount of 0.1% of bond transactions, which means paying $10 thousand on the transaction $10 million worth. Derivative transactions will also be taxable at the rate of 0.01 %.
Collection of taxes may start as early as next year, if the 11 countries that have agreed to participate, agree on the structure of innovation and impose taxes on transactions of companies and financial institutions located in their territories. According to the European Commission, the proposed tax could raise as much as €35 billion a year.
