European meeting debates financial transaction tax
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Financial experts and politicians debated the possible merits and pitfalls of a Europe-wide financial transaction tax at a meeting of the Economic and Monetary Affairs Committee last night.
The meeting saw support for the tax offered by Avinash Persaud, the chairman of financial advisory firm Intelligence Capital, Sony Kapoor, the managing director of think tank Re-Define and Stephany Griffith-Jones, a financial markets programme director at the Initiative for Policy Dialogue of Colombia University.
The commentators agreed the tax would curb the activities of high-frequency and intermediary traders as intended without damaging the real economy. It was suggested the tax could be directly beneficial to the economy by boosting GDP by 0.25% and deterring the practices most responsible for building up risk.
But the meeting did hear from others who are less convinced on the merits of the proposed tax.
Richard Raeburn, the chairman of the European Association of Corporate Treasurers, argued the cumulative impact of the tax could be too high as it will be paid by all intermediaries in a transaction.
Markus Ferber MEP warned that a financial transaction tax should not been seen as the “magic solution to everything” and stressed the need to avoid costs being transferred down the line to the end investor.
Meanwhile, Syed Kamall MEP suggested the tax’s overall impact could damage the economy and said financial institutions will attempt to avoid it. He also called for a better system to address bank failures rather than a financial transaction tax.
However, Jurgen Klute MP countered: “How could a financial transaction tax hurt the economy when the tax will in fact reduce risk, the very element which brought along the crisis?”
In the UK, much of the debate on the tax has centred on how the levy will affect London’s standing as a financial hub.
John Cridland, a director general of the Confederation of British Industry, has claimed the tax could cause London to loose business to rivals such as New York, Singapore or Hong King. George Osborne, the UK chancellor, also said the tax would hamper growth.
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Readers' comments (1)
run | 7 Feb 2012 5:34 pm
Tax equities, bonds, investors that had nothing to do with crisis. The reckless debt that created the crisis gets bailouts and tax breaks.
Boosting GDP is another outright lie. Swedish Finance Minister Anders Borg warns often that the world's first and final financial transactions tax in his country saw implementation costs of the tax out-run its own revenues. They experimented with numerous tax rates on all financial instruments. The tax itself achieved only 3% of projected revenues, before even subtracting negative revenues from reduced GDP.
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