The EU moves towards a €20bn financial transactions tax

The EU moves towards a €20bn financial transactions tax


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The European Commission has proposed a 0,01% financial transaction tax that is projected to generate €20bn a year, the Financial Times report.

The final debate is expected in the sidelines of next week’s Eurogroup.

The tax on foreign exchange derivatives alone could fetch an estimated €6.2bn, while €taxing over-the-counter trades could fetch a similar sum.

The problem with this plan is that it assumes taxes will be collected in the UK market, which remains the biggest financial center in the world. If the UK were to leave the EU with “no deal” on collecting taxes on behalf of Brussels, enforcing this tax would be complicated.

Proposals for a similar tax have been on the table since 2011 but were traditionally opposed by the UK. When originally proposed, member states and the Commission projected a yield of €57bn.

 The so-called “Tobin tax” is named after the economics Nobel Laureate James Tobin who proposed a similar tax in the late 1990s. Tobin saw this tax on short-term transactions on foreign currencies to inhibit speculation or “shorts” on currency. The other name for the tax is “Robin Hood” as it has been seen as the means to redistribute some of the wealth created in international capital markets.

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