11 members of the Eurozone today received the go-ahead to apply a financial transactions tax to trades of stocks and derivatives that occur within their countries. The EU’s tax commissioner called it “a milestone for EU tax policy“:
EU ministers have given the go ahead for 11 eurozone members, including France and Germany, to prepare a new financial transactions tax. [...]
The tax – also known as a Tobin tax after the economist who originally came up with it 40 years ago – is expected to be charged at a rate of 0.1% of the value of any trade in shares or bonds, and 0.01% of any financial derivative contract.
Although the tax is not being adopted by the UK, which already charges its own 0.5% stamp duty on trading in shares, it will nonetheless have to be paid by investors trading on the London Stock Exchange who are based in one of the 11 countries.
The other nine going ahead with the tax are Spain, Portugal, Italy, Belgium, Austria, Slovakia, Slovenia, Greece and Estonia.
As former Labor Secretary Robert Reich tweeted, “Most of Europe will now tax financial transactions, generating billions for hard-pressed budgets. U.S. should do same.” It’s unclear how much revenue Europe will raise, but the European Commission “had previously estimated that such a tax across the 27-nation bloc could yield €57 billion a year,” while “the 11 nations pushing ahead represent about two-thirds of the EU’s economy.”
Here in the U.S., lawmakers have unsuccessfully tried to implement a financial transactions tax in the aftermath of the 2008 financial crisis. The benefits of such a tax are two-fold. First, it would raise billions of dollars to repair a federal budget that expanded in the wake of a recession caused in large part by Wall Street malfeasance, thus making the financial sector repay for the damage it caused. Second, it would slow down some of the high-frequency trading that has exploded in recent years, bringing more stability and safety to financial markets.
Last year, a group of 52 financial executives, including several former heads of mega-banks JP Morgan and Goldman Sachs, endorsed the idea. Forty countries around the world have already embraced a transactions tax.