Campaigners welcome steps towards a Financial Transaction Tax

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Trade union and civil society campaigners have welcomed the latest moves towards a Financial Transaction Tax (FTT). Last month, Finance Ministers from ten EU countries agreed on the scope of the tax, which if successfully implemented, would create money for the public sector and curtail the power of the financial industry.

Julian Scola, head of communications at the European Trade Union Confederation (ETUC), told Equal Times: “A Financial Transaction Tax is important for workers primarily to give public finances a much-needed boost for investment to tackle unemployment, generate growth, make Europe more competitive and deal with the refugee crisis.

“For all those reasons Europe needs to invest in education and training, in infrastructure, in the shift to a low-carbon economy, in research and development, and in health, housing and social care. “

December’s decision was the latest step in the negotiations, which have been ongoing since the financial crisis – and subsequent bank bail-outs. While it has put taxing the financial sector on the agenda of many governments, key details such as the rate of the tax were delayed once more – this time, until summer 2016.

The European Public Service Union called the “endless delays” in the process a “farce” in a statement published after the decision. Already in 2012, the European Parliament voted by an overwhelming majority to implement the tax by 2014. But the talks for an EU-wide FTT collapsed quickly because of disagreements regarding both the scope of the tax and how the negotiations were conducted.

However, the UK group, the Robin Hood Tax campaign, still sees room for optimism. “It is great news that the 10 countries have again reconfirmed their commitment,” campaign spokesperson Simon Chouffot told Equal Times.

“It was never an easy task to implement a new tax on the financial sector, but we are getting there. And importantly, there seems to be an appetite for making the tax as broad as possible, so that it includes derivatives.”

 

Difficult to avoid

Indeed, the agreement between Germany, France, Italy, Austria, Belgium, Greece, Portugal, Slovakia, Slovenia and Spain drafts a tax of surprising muscle.

The tax would apply to both buyers and sellers and be based on both issuance and residence, meaning that anyone trading with actors based in the participating countries would be liable for the tax. Thus, the only way to avoid it would be to stop trading with the countries that together form two-thirds of the EU’s economy.

But the job is not done, Chouffot said: “There is more of a process left and it is down to the negotiators and politicians to stand up to the banks who we know are lobbying on this furiously, and implement the best version they can.“

“There are key decisions to be made on how the tax is collected and what it is going to be on: the key one there is derivatives. There is no point in designing a bucket to collect taxes and then punching so many holes it becomes a sieve. That is why we need to stand firm to an ambitious tax that was the original idea.”

At the moment, the 10 EU countries plan a narrow exemption for market-making activities (performed by middle-men who buy and sell shares to maintain liquidity in the financial markets).

Campaigners say the FTT is an easy way to raise money for the benefit of wider society. Due to the huge size of the financial sector, even at a rate of 0.01 per cent the tax would raise billions with little or no strain on the real economy. This extra revenue could allow countries to rethink their fiscal policies, avoiding the public sector cuts now sweeping across Europe.

Chouffot also stressed that the tax should have an international dimension as the effects of financial crises are felt around the world. “Commitment to aid drops during a recession, at the same time as developing economies are contracting. FTT can raise money to help plug that gap. We have very strong signals from especially France but also Germany that they will use at least a proportion of the money internationally.”

France, Spain and Germany have also indicated that part of the revenue created would be used specifically for climate aid, although they have not presented figures. Industrialised countries have long-agreed in principle to help pay for developing countries to adapt to climate change, but the source of this funding is a perennial sticking point.

A Financial Transaction Tax would also promote stability in financial markets, benefiting the entire economy, campaigners say. As the tax applies to all transactions, the increasingly popular high-frequency trading carried out by computer algorithms would face heavier taxes. The FTT could act as a deterrent to this highly speculative trading.

The biggest win, however, could be a symbolic one. The FTT would finally show that European governments put their people before the profits of the financial sector.