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Saturday, December 3, 2016

The Ministry of Finance will send investors to the Forex


The Ministry of Finance has found an interesting way of replenishment of the budget – sections of currency trading on the Moscow stock exchange will be obliged to pay a certain percentage of the total volume of all market transactions. As a result, the proportion of investors withdraw from the stock exchange on the Forex market.


photo: pixabay.com

At first glance, the Ministry of Finance letter “About personal income tax when making transactions in foreign currency at the Unified trading system (UTS) of interbank currency exchanges” looks like a logical initiative. But, unfortunately, only on paper.

A new variant of filling the state budget office found literally at your fingertips – on the stock exchange, where the exchange rate jumps and market volatility are attracted by the impressive financial volume. Under the initiative, the investor should independently calculate and pay tax on financial transactions, purchase and sale of currencies on the market, once the broker is not a tax agent. For the tax period, i.e. calendar year, the investor, on the proposal of the Ministry of Finance, will have to pay a certain percentage (the exact figure will be defined later) with the total volume of all market of currency transactions.

Even at first glance in this letter too much “if” in order to consider it viable. First, the structure of the Russian segment of the foreign exchange market is that the currency can be spent in one fiscal period and sold in another. Plenty of investors standing in long-term positions for the purchase or sale and it can last a year, two, five. When calculating the tax base in such cases, the loser will be the investor who will be obliged to pay more than normal in fact.

Secondly, more or less savvy and familiar with the specifics of the exchange with the lawyer will win on the claim in favor of the investor, as the letter of the Ministry of Finance an independent legislative act is, that is, the implementation is not required. Everything contained in this letter, it looks very damp: it assumes that the investor has made in year one the transaction on purchase of foreign currency and one for selling. In the turbulent Russian market the last two years such cases of unit.

The Ministry of Finance not the first time trying to draw the interest of citizens and investors to the currency in their favor. Earlier it was proposed to levy a tax on exchange transactions, but the idea moved into the shade as absurd. But the Ministry of Finance not so easy to stop And this new initiative could be transformed into tax amendments, which will be binding on bidders. With an increase in trading volatility, trading volumes on Moscow exchange have increased significantly. It is striking and very attractive for the Agency which is concerned with the problem of filling the budget.

In April 2016 the volume of trading in the foreign exchange market amounted to 27.3 trillion rubles (+6,5%) compared to 25.7 trillion rubles a month earlier. The average daily volume of trading currencies on the Moscow stock exchange is estimated at 1302,3 billion ($19.5 billion). Now with numbers, the situation is even more clear, as the budget revenues through tax deduction with this money will be a very nice addition.

However, the initiative of the Ministry of Finance contradicts not only common sense, but the statements of Russian Prime Minister Dmitry Medvedev, who a month earlier had stressed that until 2018, the authorities have no intention to increase the tax burden for citizens.

Even if, in theory, to assume that today’s idea in one form or another will become binding, the Moscow exchange and its currency, the section will lose part of customers. More complex procedures, be it speed verification of the client or filing a tax return additional way repel investors from foreign exchange transactions. This stream of investors interested in the currency market, subsequently can come to the Forex market, where the volume of trading instruments is much wider.

I note that the Moscow stock exchange in recent years has done extraordinary work to improve the transparency of trade processes in order to attract investors. Now the effectiveness of this work may be under threat.

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