European unions score crucial tax victory against austerity



On Tuesday, the Finance Ministers of the 27 member states of the European Union gave the go-ahead for a smaller group of 11 countries to implement a Financial Transactions Tax (FTT).

Only four Governments disagreed (abstaining, but it means the same thing in EU rules) – the Czech Republic, Luxemburg, Malta and the UK. It’s a first, and crucial, victory for the ETUC’s Social Compact against austerity.

The decision will see the introduction of a cross-border tax on speculation and financial gambling. This is a good thing, and something trade unions globally have been in favour of since the Asian financial crisis of the 1990s.

It will shift the balance of advantage in the finance sector from short-term betting on the markets to investment in the real economy, and make the banks give something back for the global financial crisis they caused.

Conservative estimates suggest it will raise €35bn a year to pay for quality public services, job creation, and tackling climate change and poverty.

But the truly historic element of the decision is the cross-border element. For the first time, we are seeing co-ordinated action by governments to constrain capital’s footloose ability to escape national decision-making on tax.

And this points the way for wider, deeper action by the G20 and other multilateral blocs.

Instead of playing national exchequers off against each other in a race for the bottom, the wealthy will be forced to play by the rules decided by democracies rather than the other way round.

The 11 countries proceeding with the FTT aren’t small beer, either. They include four of the five biggest economies in Europe, and cover around 90 per cent of Eurozone GDP. Other countries may well join the process as it gets underway, and the impact of the tax may be felt more widely still, as it is being designed so that even if the UK continues to refuse to take part, many of the transactions conducted in the City of London will still be taxed.

That was why the British Government – which seems incapable or unwilling to distinguish between the interests of City financiers and the national interest – fought so hard to block the EU decision.

Europe will now have a Robin Hood Tax, possibly as soon as the end of the year. And the pressure will be on other financial centres in London, New York and Tokyo to follow suit.