30/5/11

Financial Transactions Tax (FTT)-A tool for a fair and sustainable economy

  
Δευτέρα, 30 Μαΐου 2011 09:39
a_external_collaboration
The idea of financial transaction tax has failed to gain traction around the world but it has some chances now to become a reality in Europe. Early   this year the European Parliament moved one step closer to a Europe-wide tax on financial transactions, following a vote in favour of the report/proposal. prepared by the Greek MEP Anni Podimata. A EP resolution on Tuesday (8 March) called for the European Union to act- unilaterally if necessary- to impose a tax on financial transactions to raise revenues and discourage speculative trading.

The tax was first proposed in 1978 by the economist James Tobin, who won the Nobel Prize in 1981 for his work on financial markets The original concept aimed at curbing short-term currency speculation. Now, the debate in Europe is focused on a tax to be imposed not only on currency transactions but also on trading in derivatives, equities and bonds.
This proposal was promoted by substantial campaigning by EU civil society organisations and is also supported by many economists.
The implementation of a tax on financial transactions would allow a fairer burden sharing of the economic crisis and permit the economy to follow a more stable and sustainable growth path as it aims at curbing excesses associated with short term trading and help cool off speculative money flows and reduce price volatility. This tax if implemented in Europe is expected also to raise substantial revenues- approximately 200 billion Euros a year. The report said the tax would be applied to "every type of transaction" but did not go into detail regarding the types of transactions to be covered.
However there are counter arguments stressing that this tax may be difficult to arrange and administer and may lead to job losses especially to New York and the city of London. Some other unintended consequences are that speculators may shift their business to off shore tax heavens. Tax on fixed income securities will serve to increase the cost of government borrowing. And the biggest challenge is how to implement such a measure without crippling the competitiveness of the EU's financial sector.
Given that the above uncertainties may make difficult to agree on a common position , most of our member states would prefer to wait for a global agreement on the matter.
In response to this EP resolution, the European Commission launched a consultation procedure and is expected to produce an impact assessment (feasibility study) by analysing the administrative and economic issues raised by the proposal.
In April 2011 a thousand economists from 53 countries have written to G20 Finance Ministers and Bill Gates, who has been asked to examine innovative options, interalia FTT , to   raise money to help people hit by the economic crisis and tackle poverty.

Σχόλια  

 
0 #1 Panos Mantzaris 02-06-2011 00:18
It is an Interesting Article.

It is difficult to calculate what the impact from implementing such measures will be.
The consern is that while the politicians are seeking to get additional 200 billion tax revenues they may well cause a much greater decrease in tax revenues and may lose instead of winning (they might "shoot themselves in the foot").

You point out that an Impact study will be done. As far as I know it is very difficult to do such a study because data is scarse, and the "proper" scientific way to process such data is very hard to do and there are very few people who are qualified to work on this.

If you want check out a "Flagship" project of EU at www.futurict.eu
I have communicated with the leaders of this project when I became aware of it. I pointed out to them the potential significanc e of a "Money Circulation Model" which is missing from Greece, and in reality from everywhere. How money circulates is necessary to evaluate the impact of any economic measure. And today with Globalization, one cannot model just an isolated economy in a single country (there is no such thing). Economists do not posess the necessary mathematical skills for such a task and it is necessary to engage scientists from the Physics and Mathematics communities (like in the abovementioned project). It happens that for Economic issues, coordinator in the project is Prof. Argyrakis a physisist from Aristoteleion in Thessaloniki. Maybe you could help them with their Lobbying in Brussels.

We should be cautious when making changes, because there is a very visible risk of achieving the opposite of the intended purpose.

Panos

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