Carmignac: Tobin tax will hit economic growth

Carmignac's chairman Edouard Carmignac has warned economic growth could weaken as a direct result of the financial transactions tax if it is given the go-ahead.

At an investor conference on Monday, Carmignac, head of the company which runs Europe's largest fund, the €23bn Patrimoine fund, said the tax is "not as fair as it may seem".

Last week Investment Week reported the UK fund management industry faces complete transformation if the financial transactions tax - or Tobin tax- is implemented. In the rules' current form, securities would be taxed at 0.1% and derivatives at 0.01%.

Carmignac said: "The fate of the tax is far from being a done thing. There are aspects that on the face of it seem attractive but it is poorly understood and I am not sure it will be desirable for people if it was.

"Recent studies have looked into what the consequences will be in terms of economic growth. This tax will have to be trickled down from the buyers, to the sellers, to the intermediaries and the savers. This will affect pensions and there will be economic growth consequences."

However, he added if the tax were implemented it should apply to all countries, despite opposition from the US, UK and Asia, and he would look into how to minimise the impact on investors.

Money market funds, short duration fixed income funds and government liquidity funds would be most exposed to the damaging impacts of the tax. It could also prompt a move away from active towards passive strategies which will be less affected by the new regime.

The tax on financial transactions on stock, bonds and derivatives trades is expected to be implemented from 2014, and EU members are likely to push ahead.