European Leaders at Odds over Financial Transaction Tax
- By Andrew Deichler
- Published: 2012-01-09
European leaders are mulling whether to implement an EU financial transaction tax in an effort to help spur economic growth.
French President Nicolas Sarkozy and German Chancellor Angela Merkel are seriously considering taxing European banks and other firms for financial transactions to help the EU's central budget and 27 member states. Critics argue that such a tax could ultimately hurt the European economy while failing to avert another financial crisis.
The proposed tax would be imposed on all financial transactions between firms where one or both are based in the European Union. It would tax stock and bond trades at 0.1 percent, with derivatives deals at 0.01 percent, Reuters reported. Proponents of the tax believe it could raise 55 billion euros ($72 billion) a year.
British Prime Minister David Cameron has been the most vocal critic of the “Tobin tax,” saying he would veto it unless it was imposed globally. Cameron said that European countries should feel free to impose such a tax individually, but to do so across the entirety of Europe without support from other major economies would ultimately hurt the world's leading financial center, the City of London. “I will block it unless the rest of the world all agreed at the same time that we were all going to have some sort of tax,” said Cameron.
Nevertheless, Sarkozy has been very vocal about his support for the tax, calling it “unacceptable” that there is no tax on financial transactions and made it clear that he was prepared to move forward with the tax in France even if without unanimous support. “How can you explain that when you buy an apartment or go to the supermarket you pay tax, but that financial transactions are the only sort of purchase where you don’t pay,” he said.
An EU-wide financial transaction tax would require the support of all members of the European Union. However, the eurozone could impose such a tax if support across the EU is not available, Merkel said Monday.
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