Germany, Greece and seven other eurozone member countries support the idea of “Tobin Tax” (FTT) on financial transactions. German daily Sueddeutsche Zeitung reported, the finance ministers of Germany, Greece, Italy, France, Austria, Finland, Belgium, Spain and Portugal sent a letter to EU Danish Presidency and request to “overcome all relevant difficulties until the end of its mandate”, at the end of upcoming June.
The tax is “a vital tool for ensuring a fair share of the financial sector against the economic crisis,” the nine finance ministers underline in their letter.
Sueddeutsche Zeitung notes, that under the EU treaties, that a minimum of nine countries is needed so that they can apply the Financial Transaction Tax, even just among themselves within the framework of enhanced cooperation. THE EZ ministers hope for a support of all 27 EU-member countries. Great Britain and Sweden oppose a Tobin-Tax imposition.
The Tobin Tax took its name from Nobel Laureate economist James Tobin, who suggested this tax on financial transactions. The TT was originally defined as a tax on all spot conversions of one currency into another. The tax is intended to put a penalty on short-term financial round-trip excursions into another currency.
There are many critical voices on the issue, whereas one has to question the purpose of the FTT on one-currency transactions, like within the euro zone.
The European Fund and Asset Management Association (Efama) has voiced strong opposition to the tax and says that it would put disproportionate pressure on money market funds. “A FTT will put money market funds out of business and levy a ‘significant cost impact’ on long-term savers” said the European trade body Efama. (Further Reading Fund Web).
Can a European Tobin Tax be efficient? An interesting article Here.
OECD Obesrver wrote among other on the issue:
“Whenever development financing is discussed these days, it is hard to avoid mention of the Tobin tax. Generally, the question people ask is whether it would be feasible, even desirable, to put a tax on global capital flows to finance development. The issue also came up for discussion at the UN Financing for Development Conference, in Monterrey (Mexico) in March 2002, when heads of state and the major international institutions met to discuss ways of reducing global poverty.
That the original purpose of the tax was not development hardly matters, though for the record, the tax was proposed in 1972 by the US economist, James Tobin, as a way of throwing sand in the wheels of international finance, and so combat market volatility. Basically, it would involve taxing currency market transactions.
What may explain its appeal to some governments and NGOs is that even a very small tax rate imposed on such a large tax base as the foreign exchange market would, at least in theory, yield sizeable revenues to finance ‘global public goods’, like the environment, health programmes, poverty reduction, etc. Estimates of between US$50-250bn per year have been waved about, based on tax rates of between 0.05% and 0.25%.”
PS With its hegemonic role within the EZ and the EU Germany manage to ‘persuade’ bailout-ed countries Greece, Portugal and Spain to ‘support’ everything Merkel wants. Or am I just suffering from a sovereignty paranoia? 🙂
I am surprised they did this finally. The tax on financial transactions is in my opinion a first necessary step to control the financial market. There need to be more.
Isn’t this type of tax the reason sarkozy is behind in the polls in France. His numbers dropped after they imposed this tax in France or am I mistaken?
hm… I don’t know. google Sarkozy Tobin-Tax?
Imho you’re mistaken. Afaik there isn’t a financial transaction tax in those EU nations now. The report makes it quite clear that they hope for more support to implement it on a European level.
Well, imho Sarkozy’s shrinking popularity rather comes from the fact that he didn’t deliver any improvements for too many Frecnh voters.
The tax would not be used for “global public goods” as described but just go into the general “Euro coffers”. People who think this will be spent on things like the environment and poverty are seriously misguided.
The tax would be passed down the chain by the financial institutions and it will be the ordinary people like you and me who will end up paying it.
Sweden tried this tax and failed because business just moved out of the country. Switzerland must be rubbing its hands with glee!