By Arlene McCarthy MEP - 23rd November 2011
According to the latest Eurobarometer poll, 65 per cent of EU citizens are in favour of a financial transaction tax
Arlene McCarthy MEP
EU governments and the financial industry need to listen to the public’s views on delivering a financial transaction tax, argues Arlene McCarthy.
According to the latest Eurobarometer poll, 65 per cent of EU citizens are in favour of a financial transaction tax (FTT) and in the UK the public want to see a fairer sharing of the tax burden, with two thirds backing what campaigners call a ‘Robin Hood tax’.
My MEP colleague Kay Swinburne, in her polemic against the FTT, in the Parliament Magazine last month, may argue that “short-term political populism is not going to solve the economic crisis”, but no-one is arguing that an FTT is the answer to all of Europe’s or the global economy’s problems.
The public deserve to be taken seriously in their support for an FTT. After all, it was the taxpayer which bore the brunt of the bailout costs for the excessive risks taken by bankers and traders.
The financial sector was, and remains, at the heart of a financial crisis which has fundamentally jeopardised the health of the global and European economies.
In the EU, the financial sector has received a total of €4.6 trillion of pledged support from governments to date – almost €10,000 for every man, woman and child in Europe.
With little restraint on pay and bonuses and less lending to businesses, it is no surprise that the public is calling for an FTT to secure a fair contribution from a financial services sector that is under taxed, not least due to its activities being largely exempt from VAT.
It is disingenuous to claim that this tax will fall hardest on the real economy. What is clear is that speculators, buying and selling investments to make a fast buck will be hit more by an FTT than those who invest for many years in real economy businesses.
There is no evidence that the high frequency trading that would be most affected by an FTT does any good for jobs and prosperity in the wider economy – indeed the chairman of the UK’s financial services authority has gone further and labelled this activity as “socially useless”.
Of course a badly designed FTT could hurt the economy, as we have seen with Sweden’s attempt to introduce a transaction tax in the 1980s.
However the UK is one of 10 member states to run a successful form of an FTT, the stamp duty – a 0.5 per cent levy on the purchase of shares. A British conservative minister giving evidence recently to the UK parliament stated that the stamp duty is “efficient, enforceable and minimises impacts on market liquidity”.
So rather than attack the principle of an FTT, legislators need to focus on getting a balanced workable FTT in place. In the current crisis, finance ministries need the additional revenue to fund priorities such as tackling rising youth unemployment, to meet our climate change commitments and to finance our support for the world’s poorest countries’ development priorities.
A more innovative approach would be for the financial sector itself to acknowledge the unprecedented public subsidies and government support it has benefitted from, recognise it has been under taxed, and respond to the public’s demands by coming up with its own realistic and workable proposal for an FTT. Now that really would be popular.
Arlene McCarthy is a member of parliament's economic and public affairs commiteee
