Categories:Europe,Investments

EU claims Tobin tax will halve national contributions

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European Union commissioner Janusz Lewandowski has claimed a financial transations tax – or Tobin tax – would halve contributions to its budget from member states.

Lewandowski, commissioner for financial programming and budget, says contributions would be cut by €54 billion (£45.1 billion) in 2020.

A study prepared by the European Union (EU), revealed that the UK’s contribution would fall by almost €7.7 billion.

Germany would see the biggest fall, with contributions falling by more than €10.7 billion. France would save €8.8 billion, Italy €6.5 billion and Spain €4.7 billion.

Other significant savers would include the Netherlands, saving €2.6 billion, and Belgium, which would see its contribution reduced by €1.6 billion.

Lewandowski says: “The financial sector does not pay VAT and has received massive support by taxpayer’s money.

“Taxing the transactions of all financial institutions at rates as low as 0.01% is only fair. Furthermore, the estimated revenue which the tax would generate by 2020 can only be welcomed by cash-strapped governments across the EU.”

The controversial tax would have raised €57 billion in 2010, with an estimated €81 billion to be raised by 2020.

The European Commission has suggested two-thirds of the revenue be used to finance EU expenditure. National contributions currently make up 73% of the EU’s budget, or €93.7 billion.

In its latest release, it claimed the proposed EU-wide tax would be a “first step” towards application at a global level.

The move to introduce a tax has been rejected more recently by UK prime minister David Cameron.

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Readers' comments (3)

  • From the UK's European Scrutiny Committee quoting the European Commission's 1223 page FTT Impact Assessment (even before the damaging relocation effects): a 3.43% fall in EU GDP equates to a fall in economic output worth €421 (£362) billion and a 0.34% fall in employment equates to a loss of 812,000 jobs.

    The EU Commission brazenly announced the above study will be refabricated soon to show positive growth.

    Swedish Finance Minister Anders Borg warns often that the same FTT in Sweden saw implementation costs of the tax out-run its own revenues. FTT revenues achieved 3 percent of revenue projections before subtracting reduced GDP revenue losses in all other areas.

    The recent EFAMA study finds that if the Euro FTT were in place for 2011, it would have cost investors and pensions an astounding €38 billion for UCITS funds alone.

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  • The success of an FTT depends on how well it is designed, and fortunately the Swedish FTT is not the only design. The UK’s own 0.5% tax on share transactions (the Stamp Duty) is one of the best examples of a successful FTT, raising the Exchequer more than £3billion each year without a significant loss of business from London.

    The key design feature is that no matter where in the world a UK share transaction takes place – London, New York or the Cayman Islands – the tax can still be collected, and moving your trading business out of the UK doesn’t help you avoid the tax. This severely limits the opportunities for avoidance, and a similar approach can be adopted for other FTTs.

    Ultimately, the Swedish FTT was badly designed and therefore not very effective. If designed properly, an FTT could have a positive impact on GDP by having a stabilizing effect on the market and reducing the risk of a future crisis.

    Recent research following the European Commission’s report on the impact of an FTT shows that in the long term an FTT would contribute to GDP by having a stabilizing effect on the market and reducing the risk of a future crisis.

    Economists Avinash Persaud and Stephanie Griffiths-Jones have shown that if designed properly this small tax could help rebalance the economy of the UK: http://robinhoodtax.org/sites/default/files/Financial%20Transaction%20Taxes%20-%20Griffith-Jones%20%26%20Persaud_0.pdf. This is also suggested by BBC Business Editor Robert Peston in his blog on the likely effect of an FTT on the British economy: http://www.bbc.co.uk/news/business-15148590

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  • "The UK’s...Stamp Duty...raising the Exchequer more than £3billion each year..."
    Yes, exactly right out of investor accounts. Abolish Stamp Duty Now. Charities and pseudo-charities are fighting fiercely for a huge portion of an investor's-pensioner's account, while simultaneously begging to be exempt from the tax itself and deceiving investors that they won't have to pay.

    EU charities and NGO's are sloshing around in nearly 200 billion in surplus cash and a couple trillion in assets, feigning dire straits during a financial crisis. Never let a good crisis go to waste.

    "Swedish FTT was badly designed and therefore not very effective."
    And Sweden still does not want your perfectly designed FTT. Swedish Finance Minister Anders Borg warns often that the same FTT in Sweden saw implementation costs of the tax out-run its own revenues. FTT revenues achieved 3 percent of revenue projections before subtracting reduced GDP revenue losses in all other areas. With a perfectly designed FTT, revenues might cover the cost of implementation.

    "...this small tax could help rebalance the economy of the UK:"
    The UK conducts 80 percent of Europe's financial activity and will pay 80 percent of the following losses:

    From the UK's European Scrutiny Committee citing the European Commission's 1223 page FTT Impact Assessment (even before the damaging relocation effects): a 3.43% fall in EU GDP equates to a fall in economic output worth €421 (£362) billion and a 0.34% fall in employment equates to a loss of 812,000 jobs.

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