CMV: The European Union should introduce a comprehensive financial transaction tax

Fri Jun 08 2018 15:00:00 GMT+0000 (Coordinated Universal Time)


Gabriel Wollner

Humboldt University Berlin

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An international financial transaction tax is levied on transactions involving particular assets, for example, stocks, bonds, currencies or derivatives; the proposed tax rate is usually low: depending on the type of asset, somewhere between 0.01 per cent and 1 per cent of the value of the transaction. Should the European Union introduce such a tax? There are five reasons why it should:

· Public Goods Provision: Through paying a tax, those who benefit from the availability of a stable financial system would contribute to the costs of maintaining it.

· Externalities and compensation: Tax revenues can be used to compensate those who are adversely affected by financial instability and crisis.

· Social Justice: By effectively reducing capital mobility, a financial transaction tax will make it easier for states to ensure social justice.

· Global Justice: Tax revenues can be used to reduce global poverty and narrow the gap between rich and poor.

· Economic stability: An international financial transaction tax will make international finance less volatile and ensure that assets are put to long-term productive use.

Background Information

  • Ideas to introduce a financial transaction tax or a tax in the style of a “Tobin tax” within the European Union have been circulating since the wake of the financial crisis

    • There has been a concrete proposal for a EU-wide financial transaction tax called EU FTT by the European Commission since 2011

  • Public support for a financial transaction tax has been high within the EU according to polls and studies over the past decade

    • A number of polls found that between 61 and 63 percent of interviewed EU citizens (or G20-citizens) were “strongly in favor” of a transaction tax

  • However, progress on the implementation of a financial transaction tax has been rather slow over the past years, allegedly in part because of financial sector lobbying and lacking party support within some EU member states

Further Reading


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