The financial transaction tax at the heart of the debate
The combination of a recessionary squeeze in tax revenues and the money that governments have had to spend to rescue the financial sector as well as stimulate the broader economy has increased the prospects of a fiscal crisis with many rich and poor country governments facing budget deficits of an unprecedented magnitude.
Based on calculations of the Austrian WIFO economic research institute, a global financial transaction tax of 0.05% could yield revenue of about 1% of nominal world GDP per year. You can download the WIFO study hereunder.
As German SPD put it, this would cover about half of the annual additional fiscal resources mobilized by G20 countries for anti-crisis measures (approx. 2% p.a.). A rough estimate of the revenue potential for Germany stands at about 10 to 20 billion EUR per year. The debate among finance ministers in London in the run-up to G20 has shown a basic agreement that burdens of the financial crisis ought to be shared in a fair manner. You can download the SPD position paper here.
Autumn 2009: G20 and EU leaders in favour of a financial transaction tax
At the G20 in Pittsburgh, Merkel put forward the idea of a financial transaction tax. G20 tasked IMF to probe "Tobin tax" (Reuters).
G20 leaders tasked the International monetary Fund to investigate ways the financial markets could pay for the effects of the economic crisis, such as a tax on all international financial transactions: “We task the IMF to prepare a report for our next meeting with regard to the range of options countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.”
Leaders’ Statement – The Pittsburgh Summit September 24–25, 2009
In October 2009, EU leaders asked the commission to examine ways of "innovative financing," including the feasibility of a tax on financial transactions, to help less-developed countries and possibly help reduce national budget deficits.
A call by UK Prime Minister Gordon Brown for a global tax on financial transactions received some support in Brussels on Monday 9 November. French finance minister Christine Lagarde expressed her support of Mr Brown by saying the proposed tax would be a "very good thing."
2010: When it comes to implementation...
The IMF launched an online public consultation on financial sector taxation in December 2010 (click here to download the consultation note), to seek views from the public on the matter of financial sector taxation (click here to access the consultation page).
The online consultation attracted more than 90 responses from CSOs, academics, the private sector and government officials. A significant number of the submissions included research papers and policy briefs. The report will be presented to the G-20 Finance Ministers at their April meeting in Washington, D.C.
In March 2010, the European parliament passed a resolution caling on the European Commission to consider the financial transaction tax. One month later, on 6th April 2010, the European Commission published a paper on innovative sources of financing, which considered the financial transaction tax, among other possible options. The paper rejects the idea of a financial transactions and has been strongly criticised. To know more about the paper and the reactions to this paper, please click here.
Those in favour of a Financial transaction Tax
• Academics: Stiglitz, Paul Krugman, Danny Rodrik, Geoff Sachs, Paul Volker, Keynes!
• Politicians: Sarkozy, Merkel, Brown, Pelosi, Rasmussen, Junkers. Obama supported the FTT during his campaign. Barney Frank want it to be global. Barroso has been favourable, as have the Austrians.
• Other key financial figures: Adair Turner, George Soros, Warren Buffet
• Media: Le Monde, The Mail, The Guardian, New York Times…
• Celebs: None yet but Richard Curtis interested.
Those against a Financial Transaction Tax
On 9 September, the Wall Street Journal mentionned "ECB'S Trichet Opposes Tobin Tax On Fincl Transactions ", which was confirmed in last week, when European Central Bank president Jean-Claude Trichet said: "I personally am not convinced."
- the US treasury.
- Significant parts of the UK government.
- Finance ministries generally.
- The City of London and Wall Street
- Fat cats the world over
- The Economist and the Financial Times
Those who are not clearly in favour of a Financial Transaction Tax
Position held by president Jose Manuel Barroso: the tax idea has "potential," but that "by its very nature such an initiative would need to be implemented globally." The Europeans for financial Reform are calling on the President of the European Commission, Jose Manuel Barroso to push for the creation of a financial transaction tax. Please give us your support by letting him know you support our calls. Write to Barroso!
29.09.2009 - Wall Street Journal: EU Juncker: No Objection To Tax On Financial Transactions