Tobin's tax on financial transactions takes a new, ominous turn.
The capture of capital and restriction of financial movement is becoming a comparative advantage among developed countries. This is not a welcome development.
EU builds case for finance tax ahead of draft proposals
Published 20 July 2011
If set at a low enough rate, a tax on financial transactions (FTT)
would hinder speculation on sovereign debt while avoiding a massive
relocation of banks to safe offshore locations, argues Michel Barnier,
the EU's internal market commissioner. Brussels is expected to present
plans for an FTT in the autumn.
However, the tax has one powerful opponent – the UK. Britain's
opposition has not wavered as the country's government is adamant that
it will not introduce new taxes at a time when banks are struggling to
prove their liquidity.
In spite of London's staunch resistance, the European Commission said
it will come up with a draft FTT in the autumn, arguing it will help
hinder speculation on sovereign debt.
The argument comes as eurozone leaders prepare to meet in Brussels on
Thursday (21 July) to agree a second bail-out plan to rescue Greece
from its mounting debt pile.
"We know it will be difficult, we know there needs to be unanimity
[among EU member states]," Commissioner Barnier told members of the
But he thinks it is worth trying. "We believe that this tax is
economically sustainable by markets as long as the rate is modest," he
said. The tax, he added, would be "technically easy, financially
productive and politically appropriate" given the huge amount of
taxpayers' money that governments invested to rescue the banking
sector during the 2008 financial crisis.