By Desmond Hinton-Beales - 7th February 2012
We want a citizen friendly approach, where the whole burden is not put onto taxpayers
Anni Podimata, MEP
A financial transaction tax (FTT) is an important part of a "citizen friendly approach" to securing economic growth, according to parliament's rapporteur on the issue Anni Podimata.
Podimata told reporters at the European parliament that the commission's proposal for an FTT is a step "in the right direction".
The Greek S&D deputy said the tax would reduce the incentives for "harmful transactions that increase systemic risk and provide no benefit to the real economy".
"Instead of the growth friendly fiscal consolidation decided upon at the last European council summit, we want a citizen friendly approach, where the whole burden is not put onto taxpayers.
"The FTT is an integral part of such an approach," she said.
Podimata was presenting a report by the prominent economists Stephany Griffith-Jones and Avinash Persaud, which said that an FTT could benefit the European economy and raise growth levels.
"This is a well-founded, reliable, comprehensive study on the feasibility, design and impact of an FTT," said Podimata.
Griffith-Jones, financial markets programme director for Colombia university's initiative for policy dialogue, said an FTT has "several economic advantages", including the raising of over €50bn in revenues.
These funds could be used for fiscal consolidation and the lowering of government borrowing costs, increased capital for the European Investment Bank, or a decrease in other taxes, she said.
"We have good examples of FTTs that work, including the UK's stamp duty," said Griffith-Jones, who added that a large share of the tax would fall on high frequency trading, which makes up of 40 per cent of all transactions.
"These sorts of transactions are destabilising and draw liquidity out of the system," she said.
Griffith-Jones also moved to counter the commission's claims that an FTT would have a "-0.2 per cent effect on growth", saying that the tax's contribution to reducing the risk of future crises must be considered.
"When this is taken into account, you obtain a positive effect on growth of about a quarter of a percent", she said.
However, German EPP deputy Markus Ferber warned against viewing the FTT as the "magic solution to everything", and said that it needed to ensure that costs are not simply passed down the line to pension funds which invest in financial products.
Further comment came from ECR spokesperson on economic affairs Kay Swinburne, who said the commission is rewriting its FTT impact assessment, attempting to gloss over the truth of a 1.76 per cent drop in GDP and an exodus of EU companies.
"The assessment was clear: an FTT will lead to job losses, slow growth, and businesses leaving the EU altogether. The commission wants to whitewash these warnings," she said.
"The EU institutions pay lip service to jobs and growth but behaviour like this exposes the real agenda. The commission is adamant it will impose this tax, regardless of the consequences."
