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Europe’s Crazy Finance Tax

The Editors: “Europe’s Crazy Finance Tax“, Bloomberg View, 02 Νοεμβρίου 2014.

 

Wrangling among the 11 euro-region nations planning to tax financial transactions is further evidence, if any were needed, that the levy is a bad idea that should be abandoned.

The European Commission acknowledges that the latest version of its planned financial transactions tax (or Tobin tax, or Robin Hood tax, if you prefer) isn’t the best option. That, it says, would be a globally coordinated toll on trading — which is laughably unlikely. The narrower the tax’s coverage, the less sense it makes. That’s why Europe’s proposed transactions tax isn’t even second-best: An earlier effort to apply it across all 27 European Union members failed.

In its current diluted form, the tax would charge 0.1 percent for nonderivative securities such as government bonds or company shares, and 0.01 percent on the notional value of derivatives trades. Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia, Spain are the willing 11 countries; but they can’t agree on how to divvy up the proceeds. They’re struggling to meet a self-imposed deadline for an agreement by the end of the year, with the duty scheduled to be imposed by the end of 2015.

The most fundamental question about the tax still hasn’t been answered — what’s it for? If the aim is to reduce volatility and speculation in the securities markets, it’s far from clear that the tax would work, according to a study by the consulting firm PricewaterhouseCoopers.

 

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