The European push for a financial transaction tax received a boost Tuesday following the agreement by financial ministers from eleven nations to support such a levy during a meeting in Luxembourg.
The financial transaction tax—known also as the Tobin Tax, a Robin Hood Tax, or simply FTT—would place a tiny tax on financial trades that advocates say would reduce the damaging impact of speculative and high-speed trading while at the same time raising much-needed revenue for social programs and public investment.
The proposal, which was pushed aggressively by France and Germany, was also backed by Belgium, Austria, Slovenia, Portugal, Greece, Italy, Spain, Estonia and Slovakia.
Europe's staunchest opponents to the tax remain the UK, Sweden, Poland and others who fear that their financial markets would suffer as traders move their transactions to centers without such structures. This argument spurs FTT supporters to counter that this is why a global financial transaction tax is ultimately necessary so that the financial industry cannot duck its social responsibility by constantly moving operations to those markets with the least accountability to public service.
"It will contribute to shifting the burden from the citizens to the financial industry - which has not yet contributed its fair share to the cost of the crisis." —Anni Podimata, S&D Euro MP
As the advocacy group Europeans for a Financial Reform explains: "Taxing the financial sector would enhance fairness" in nations and across the global economy. In addition to increased government revenue, which the group says is badly needed to support the transition "towards more inclusive, fairer and cleaner societies," the tax would end "purely speculative, socially useless activities" and instead "promote sustainable, long-term investments that are needed to green our economies."
"A global financial transaction tax of 0.05%," claims the group, "could yield revenue of about 1% of nominal world GDP per year." And, they argue, the revenue would provide funding for "long-term public investments, to finance global development and climate change."
Though the agreement reached on Tuesday does not lay out the full details of the scheme, Austrian Deputy Finance Minister Andreas Schieder called the move a "giant leap" for Europe. "The way is now clear for a just contribution from the banking and financial sector for financing the burdens of the crisis."
Hannes Swoboda, president of the Progressive Alliance of Socialists and Democrats (S&D), the second largest voting block in the European Parliament, welcomed the development.
"We are very happy that this group of countries has decided to go ahead with introducing a financial transaction tax. This is good news for EU citizens," Swoboda said. "It is important to start the process among those countries who are willing but we hope that others will follow."
"Our group has been campaigning for many years for this tax," he added. "It is a matter of social justice. It is time that those who caused the financial crisis help fix it."
Anni Podimata, S&D Euro MP and author of the European Parliament's report on the FTT, expressed hope that momentum for the FTT would continue and that many other countries would join up.
"This is a reward for Parliament, which has been calling for an FTT for over two years," Podimata said. "It will contribute to shifting the burden from the citizens to the financial industry - which has not yet contributed its fair share to the cost of the crisis. It will target the most speculative activities and at the same time provide finances equal to more than half of the EU's annual budget at a time of intense fiscal consolidation."
And Reuters adds:
Austrian Finance Minister Maria Fekter said the 11 countries would present a model for how the tax would work by the end of the year, and it was realistic to expect the tax to be implemented by 2014.
Semeta said countries aiming to launch the tax did not yet agree where the proceeds should go or how they should be spent.
"Some of them would like to spend it individually. Some prefer to use part of the proceeds to finance the EU budget. It is premature to say what will be the final outcome," he said.
The breakthrough was a surprise to many EU diplomats who had thought Germany might fail to convince sufficient countries to join the plan, which has been in the works for two years.
After heavy diplomatic pressure from Berlin, Spain and Italy agreed to support the measure, as well as Slovakia and Estonia.
The European Commission has said a tax on stocks, bonds and derivatives trades from 2014 could raise up to 57 billion euros ($74 billion) a year if applied across all EU countries.
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