The 2012/01/18 at 06:50
As the sea snake in international finance, the Tobin tax on financial transactions is back on centre-stage at the start of this year. A few months off from the presidential elections in France, President Nicolas Sarkozy is out to be a pioneer in this project under debate for several years now. At the start of January, the President surprised his partners by announcing that a financial bill will be submitted to the Council of Ministers in February and integrated into the 2012 Rectification Law, for application from this year onwards or from the start of 2013. France “will not wait for all the other European Union countries to come to an agreement to implement the tax on financial taxes,” warned Nicolas Sarkozy, who expects it to raise 500 million euros per year. Italian Prime Minister Mario Monti has urged the French President not to play solitaire: “To be more effective, this measure should concern at least the Eurozone.”
The same sounds can be heard from Germany, where Angela Merkel wishes to follow the European calendar. The German Chancellor declares that she is supportive of this tax, as is her Minister of Finance Wolfgang Schäuble. But the liberal political party FDP from which the Minister of Economy Philip Rössler hails is staunchly opposed to it, unless it is introduced by the Union’s 27. To get around the United Kingdom’s firm rejection, Nicolas Sarkozy is said to be attempting to persuade the European Council to set aside the option of a tax on the 27. It seems that European leaders will be working, in coming months, on a new tightened formula for 17 Eurozone members. At best, the tax will emerge in 2014, a timeframe considered too far away by the French presidential office. To accelerate the implementation of the tax on a European level, France may nevertheless count on the support of Madrid.
Following a meeting with Nicolas Sarkozy, the new Spanish Prime Minister Mariano Rajoy openly pronounced himself to be in favour of the Tobin Tax, which in his opinion should be adopted as quickly as possible. In Paris, the hypothesis of the introduction of a French tax for the French only stirs concern1. The association Paris Europlace has reminded of its opposition to the introduction of a tax “which, if it is not European, will weaken the French economy”. Taking as the basis of calculation the rate proposed in the European directive (a tax of 0.1% for share and bond transactions, a tax of 0.01% for derivatives), the move represents a cost of 40 to 50 billion euros to establishments carrying out market activities in France.
According to the French economist Marc Touati questioned by Commerce International, “such a tax would lower the profitability of market activities in France to 2%, even less, in other words, profitability lower than that of a Livret A bank savings account (2.25%)”. The consequence would be a massive move of transactions towards the City of London. “This would lead to the disappearance of several thousands of jobs in the space of ten years, even several tens of thousands of indirect jobs,” adds the specialist. Indeed, previous experiences of tax on international financial transactions have not been very convincing. Sweden introduced such a tax in 1984 (0.5% on financial transactions), only to abandon it in 1990 due to what was judged as being a disappointing yield of income after a leak of capital to other financial markets…
1editorial note: Concern dominates even amongst NGOs. See here the reaction of the international confederation Oxfam, worried about the "immense vagueness" on where this possible tax may go.