European Commission backs Tobin tax
By Michael Northcott Tuesday, 23 October 2012
Leaders in Europe have backed proposals to introduce a financial transactions tax that will affect 10 countries on the continent.
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…