“Robin Hood tax, Tobin tax, fat tax. Call it what you will,” says Laura Chesters in The Independent on Sunday. What matters is that proposals from Brussels, backed by France and Germany, for a financial transaction tax (FTT) to be introduced worldwide by 2014 have the support of high-profile figures including Bill Gates, the Archbishop of Canterbury and George Soros.
The tax would see a fraction of a percentage taken from each financial transaction, from hedging contracts to currency exchange. Its supporters say it is such a tiny levy it can’t possibly hurt the banks. Detractors, including David Cameron and George Osborne, argue that if the tax is just Europe-wide, it will hurt Britain (where four out of five of Europe’s financial transactions take place) disproportionately. Some banks may even leave.
Given the electronic and highly mobile nature of financial transactions, this effect will be rapid, says Kamal Ahmed in The Daily Telegraph. Nor will such a tax, as the campaigners hope, lead to greater redistribution and “make the guilty pay”. European officials, in a little-reported paper called the Own Resources Proposal, are arguing that the tax could be used to fund the EU directly, “thereby giving the EU some fiscal independence from member states and that rather irritating detail; democracy”.
Tim Bennett looks at the proposed European financial transaction tax – aka the ‘Tobin tax’ – and explains why it is a very bad idea.
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The revenue could end up in the wrong hands and won’t help the man in the street, says Simon Lewis in The Times. People taking out car insurance or a mortgage or investing in a pension wouldn’t pay the tax directly, “but they would bear the impact” via the transactions earlier in the chain that were subject to it. Borrowing costs would also increase. The tax would also damage our financial services sector. Sweden tried a similar tax from 1984 to 1991. It raised only a 30th of the proceeds predicted, says Chesters, and 60% of the trading volume of Sweden’s 11 most actively traded stocks migrated to London.