The ASE Index May Tumble Because of Capital Gain Taxes

The ASE Index, the benchmark index of Greece may see a bit of low moment after reaching its highest figure in the last 16 months. The policy makers of the country have decided to introduce a capital gains tax on the country’s equities. This decision has been taken to lower the budget deficit and this can put the rally in Greek shares in a halt.

The Chairman of the Hellenic Capital Market Commission, Constantinos Botopoulos, stated that they have started discussing with ministry that the already existing tax on the stock exchange of the country and capital gains tax are kind of counterproductive. Incidentally, Hellenic Capital Market Commission looks over the stock exchange of this European country.

From 1st April, 2013, the Greek equities will be subject to a 20% levy on any sort of gain experienced in the capitals, apart from the current 0.2% financial transaction tariff, if this measurement proposed by the policy makers is passed on the country’s parliament. For releasing the bailout funds, the international creditors of Greece have asked for $3.3 billion of the additional taxes in this year.

According to Hellenic Fund and Asset Management Association’s President, Kimon Volikas, this proposal will negatively impact the ASE Index and therefore, the rebound of 107% will be suffered. Incidentally, the ASE has increased to 983.91 on yesterday, marking its best value since 29th August, 2011. Volikas added that the capital gains taxation is something unheard of and it happens throughout the world. However, Volikas reminded that the situation for Greece is different because of the slow economic evolution. Hence, Volikas believes that this timing for policy makers to come up with this decision is completely wrong and they should have instead tried to motivate the investment.

If the capital gain taxes of the other big economies are concerned, investors in US face huge 23.8% tax on the long-term capital gains; however, the taxation procedure varies depending on income of the corresponding investor. The top rate for UK investors is 28%.

The tax proposal has been delayed numerous times since its first proposition in 2007. Even this time, the Government has already been facing serious opposition from the investor groups and some insider sources suggest that they may even postpone this proposal for the time being and adopt a wait and watch policy.