Successful protests from political groups and private sector firms has led to an overhaul of the European Union’s proposed financial transactions tax (FTT).
The so-called Tobin tax is now likely to affect only share trades at first, rather than bonds and derivatives as originally planned. The levy will be cut to a rate of 0.01% per trade - a tenth of the initial proposal. Protests from the finance industry - which has lobbied hard to convince ministers that the tax would hit savers and investors, hurting the real economy for very little gain - have been hailed after Europe’s U-turn, with TMF Group’s Richard Asquith particularly vocal during proceedings.
“The introduction of FTT in Hungary is not going as planned, and many of the assumptions promoted by the proponents of the EU-11 regime will be put into question,” Mr Asquith said in March, highlighting that Italian trading volumes were down 38% at the start of the year. Figures released today (May 31) show the tax has raised barely half its expected level in early adoptee Hungary this year as it hit trading volumes and pushed business abroad, confirming our early suspicions.
Analysts say the move shows leaders have realised the FTT is a bad idea, but cannot scrap it as so much time has already been invested. Raoul Ruparel from OpenEurope says Europe is now on a face-saving mission, and given that it has already thrown in the towel, it is hard to see the states “ramping up the tax over time”.
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