European Commission backs Tobin tax

Leaders in Europe have backed proposals to introduce a financial transactions tax that will affect 10 countries on the continent.

by Michael Northcott
Last Updated: 19 Aug 2013

With its diabolical financial plight, the eurozone needs all the help it can get to prevent a complete meltdown, and now the European Commission has concocted a way of raising some more cash. Leaders have agreed on plans for a tax that will be levied on all financial transactions across 10 EU member states, and it is thought that the scheme could raise billions of euros.  

The so-called ‘Robin Hood tax’ works by imposing a tiny charge on transactions of currencies, shares traded through banks and financial institutions, and bonds. Millions of transactions such as these are made around the world every day, so it is thought that the total revenue raised could be huge. Somewhere in the region of 57bn euros per year, if the whole of the EU got involved.

But therein lies an obstacle to the EC’s goal of pan-European homogeneity. The UK government has resisted any involvement in such a scheme because of fears that it would disproportionately affect the City of London. Given that London is one of the largest financial centres in the world, we think this is probably a fair observation. Nonetheless, on the continent, Germany France, Italy, Spain, Austria, Belgium, Greece, Portugal, Slovakia and Slovenia have all signed up to the new deal. That ‘ever closer integration’ mantra is gradually being willed into reality…

The EC president Jose Manuel Barroso said: ‘I am delighted to see that 10 member states have indicated their willingness to participate in a common financial transaction tax. This tax can raise billions of euros of much-needed revenue for member states in these difficult times. This is about fairness – we need to ensure the costs of the crisis are shared by the financial sector instead of shouldered by ordinary citizens.’

The only problem is…unless every single currency exchanging body and financial centre in the world signs up at exactly the same time, there will always be a group somewhere that thinks ‘we could do rather well out of this.’ This is the main reason why no-one has had the guts to try this idea since it was dreamed up by the economist James Tobin in 1972. In this case, if the EC’s version goes ahead, then transactional activity is likely to divert largely away from those 10 jurisdictions offering a major boost to London and New York. 

Anyway, with Spain and Greece teetering on the edge of disaster, perhaps this is a good idea for drumming up some cash in hard times. And given that a lot of the economic damage the eurozone is currently suffering was caused by banks, perhaps it’ll be nice to see them cough up some cash…

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Latest on MT

When will high street banks disappear?

When will high street banks disappear?

Branches are closing at an accelerating rate, but don't expect them to disappear entirely.

Burger chain Byron em-broiled in controversy after immigration raid

Burger chain Byron em-broiled in controversy after immigration raid

Reputational disasters can emerge out of thin air.

Apple still over-relies on the iPhone

Apple still over-relies on the iPhone

The tech giant's trying hard to diversify, but karaoke shows and Pokémon Go won't make up for dropping iPhone sales.

Will Mark Zuckerberg's mobile-first strategy make Facebook bigger than Google?

Will Mark Zuckerberg's mobile-first strategy make Facebook bigger than Google?

UPDATE: Facebook's mobile revenues increase 84% year on year. Does this give the social network the edge over Google?

5 things you didn't know about R&D tax credits

5 things you didn't know about R&D tax credits

Is your business innovating? You could claim back tax on fuel, staff and other costs.

Can you start your own business without quitting your day job?

Can you start your own business without quitting your day job?

Torn between the freedom of the start-up life and the security of the payroll? As a part-time entrepreneur you can have both.