The 2011/12/29 at 06:50
Cécile Boutelet in Berlin
Even in Germany, the reaction to the idea of introducing a financial transaction tax is far from unanimous. In a joint declaration published on 28 November 2011, representatives of the German economic world pronounced themselves against the introduction of such a tax, fearing the negative consequences on the economy as a whole. Debated during a hearing of the Finance Committee of the Bundestag – the German Parliament – on 30 November, the theme gave rise to bitter discussions. “We doubt that the introduction of a tax on financial transactions (…) has the means to meet the objectives (that it intends to follow),” declared, with one voice, the main organisations representing the German economy, including the influential federations of Chambers of Commerce and Industry (DIHK), industry (BDI), employers (BDA) and banks (BDB).
All the signatories of the declaration consider that the reasons cited in favour of this tax are “not convincing” and fear consequences on the attribution of loans, necessary for growth. As the tax would at least be partially carried over to prices, it is ultimately the client – whether a business or an individual – who will bear the load, they write. In particular, they consider that companies will be directly affected in that many insure themselves against currency exchange and interest rate risks in their exports. For these companies, the tax is said to have significant consequences on pension funds, at a time when Berlin is encouraging complementary funded retirement schemes.
Long reserved to activities from the anti-globalist group Attac, the idea of introducing a financial transaction tax has worked its way up the priorities of European leaders in the last few months. Nicolas Sarkozy and Angela Merkel have announced their agreement on this topic, and the European Commission presented a proposal, on 28 September 2011, foreseeing the creation of a financial transaction tax, in the 27 EU countries. Failing the participation of all member countries of the EU, the agreement may be limited to countries from the euro zone. The United Kingdom has already announced its refusal to cede to such a tax.
According to the project presented by the Committee, the tax will apply from 2014 onwards to a wide field of financial products: shares, bonds, derivatives and structured financial products. In all, 85 % of financial transactions are to be affected. The tax is to be deducted by banks, stock exchanges and financial service providers. The rate will remain low: 0.1 % for stock transactions and 0.01 % on products. On the other hand, bank loans and mortgages, exchange operations, insurance contracts and other financial products aimed at individuals will not be targeted. The European Commission considers that the tax could bring in tax entries of around 57 billion euros. It nevertheless calculates that in the long term, it may be hamper growth in the EU by 1.76 %. Statistically, this shift would mean a drop in tax income of 80 billion euros in the EU.
The Bundesbank, the central German bank, has also warned against the risks. The introduction of the tax on a European scale, or simply within the euro zone, would result in a relocation of financial activities to other markets, it believes. “In the case of an introduction of a limited tax in Europe (namely if the United Kingdom does not participate), we should expect a disadvantage to the pioneers without any catch-up effect in the others,” it indicated in a press release.
Nevertheless, the defenders of the so-called Tobin tax, named after the first economist to formulate the principle of a tax on financial transactions in 1972, are numerous in Germany. At the hearing of the Bundestag Finance Committee, Dirk Müller, a trader, thus defended the tax before the deputies, considering that protection against price risks, raised by economic world representatives as a reason for refusing the tax for derivatives, would only affect “a small share of exchanges. For 0.05 % in tax, the world is not going to collapse,” he concluded.