State may chop ABS tax

The government is considering the possibility of abolishing the tax on the income raised from the sale of asset-backed securities (ABS) and the setting-up of an institutional framework to encourage this relatively novel form of financing, a leading Finance Ministry official said yesterday. Addressing a seminar on securitization, Ioannis Kousolakos, general secretary of fiscal policy at the Finance Ministry, said his department is currently reviewing the tax governing such transactions and might do away with the levy as part of tax system reforms due to be finalized this year. The charge on ABS is estimated at about 2.43 percent, a hefty amount compared with the 0.3 percent for stock transactions. Kousolakos said the state stands to lose some 350 billion drachmas should it decide to abolish the tax on ABS transactions. He said the removal of this levy could pave the way for state-controlled entities such as telecoms operator OTE and electricity utility PPC to venture into this form of financing by securitizing their dividends. While securitization is relatively new to Greece, the area, which took off in the USA in the early 1970s and gained ground in the mid-1980s, is considered one of the fastest growing sectors in European bond markets, Michael Raynes, managing director and head of the European Securitization Group at Deutsche Bank, said. The UK and France continue to dominate the market but other countries are beginning to make an impact, notably the Netherlands, Germany, Spain and Ireland. Raynes said that the European issuance last year amounted to 145 billion euros. The UK accounted for 37 percent of this figure while Greece’s share came to just 2 percent. Greek public entities have been bolder than their private counterparts in this form of financing, with the size of their issuance accounting for 14 percent of total securitization by European government agencies, according to Deutsche Bank data.

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