That is the conclusion of economist Friedrich Heinemann in a study for the Investment Management Association, the trade group for the U.K.'s fund management industry. His reasoning: If the typical European mutual fund, whose growth is constrained by confusing and costly national laws, were to attain even half the size of the typical U.S. fund -- it’s now one sixth as big -- economies of scale would permit lower fees, as in the U.S.
Cross-border fund investors are the biggest losers, says Heinemann, who works in Mannheim for the Centre for European Economic Research. A German investor, for instance, pays twice as much capital gains tax on a foreign investment as on a domestic one.
Heinemann’s remedy also borrows from the American approach: Sue! He urges the European Commission to use the European Court to promote a unified market. “If the commission is serious about the Financial Services Action Plan [intended to create a single market by 2006], it should take member states to the court,” declares Heinemann.
