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03 December 2009

MEPs debate pros and cons of financial transaction tax – European Commission, however, isn't planning any measures at present

Noting the divergence of views at the hearing, Wolf Klinz (ALDE, DE) said that 'at the end of the day we'll have to take a political decision'. McCarthy (S&D,UK) pointed out that the public would like to know who will pay in the next crisis making a 'Financial Transaction Tax' necessary.

A tax on financial transactions is probably not the best way to curb speculation and find extra revenue to bail out failing banks, MEPs heard on Wednesday at a public hearing held by the EP Economic and Monetary Affairs Committee.

Following the September G-20 summit in which Gordon Brown's suggestion to introduce a financial transaction tax (FTT) met with a lukewarm response from global finance ministers, the MEPs and experts from various organisations discussed the "Tobin-style" tax and the feasibility of introducing it in the EU.
Any such levy would be vigorously opposed by the financial industry, according to Xavier Rolet, chief executive of the London Stock Exchange group, as it would increase costs and have a "substantial damping effect" on transaction activity. By contrast, Sony Kapoor, managing director of think-tank Re-Define, claimed the "revenue potential is enormous".
The rate of 0.01 % would raise €287 billion worldwide, with €130 billion alone coming from the EU plus Switzerland and Norway, according to an Austrian study cited by Alexander Wiedow, the European Commission's director for taxation and customs union.
Moreover, it would be "cheap, easy to collect [...] and would be one of the simplest taxes to be implemented" as nowadays "all can be done electronically", argued Sony Kapoor in response to a question by Diogo Feio (EPP, PT), who asked about the possible cost and "simple manner" of levying this tax.
The European Commission, however, is not planning any measures at present and for the time being is just following the international debate, as "we don't know to what extent it will affect speculation, stability", said Alexander Wiedow.
According Jakob von Weizsäcker, a research fellow at the Bruegel think tank, the recent global turmoil has generated renewed interest in FTT, with some considering it to be a kind of "Swiss army knife" capable of solving all sorts of problems.
By contrast, Geoff Lloyd, senior tax advisor to the OECD, believed "we shouldn't lose sight of the crucial importance of financial sector" for growth. Pointing to the tax as a "new source of financing" he also stressed that it has to be "difficult to avoid, easy to collect and must secure public acceptance". And that, he believed, would be "very hard".
In response to a question by Udo Bullmann (S&D, DE) about the "optimal size" of such tax and a query by Sven Giegold (Greens/EFA, DE) about its impact on SMEs, Xavier Rolet said "we actually don't know what the rate of the RTT would be" but it would still represent a "very significant penalty for companies".
Derk Jan Eppink (ECR, BE) condemned the tax as "a Loch Ness monster" and a "brother of Bolkestein directive. We do not need that tax," he exclaimed.
Noting the divergence of views at the hearing, Wolf Klinz (ALDE, DE) said that "at the end of the day we'll have to take a political decision". And as Arlene McCarthy (S&D, UK) pointed out, the public would like to know who will pay in the future for the crisis and therefore is "very much in favour of some form of FTT".

© European Parliament

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