In the end, the European Commission has almost killed the financial transaction tax–the so-called Tobin tax. Its impact on revenue could be next to nil after the consensus among the 11 countries set to implement it stumbled against the evidence that trade levels have fallen in France and Italy, where the Tobin tax is already in place.
Spain, whose original draft pointed out that up to €5 billion could be raised per year, might be left with barely €67 million. Indeed, the design of the Tobin tax is about to be heavily cut down: what was meant to be a 0.1% levy on all operations that involved stocks and debt, and a 0.01% levy on derivative products, could end as a 0.01% tax restricted to equity markets.
Although still officially unconfirmed, Brussels would have taken a few steps back under pressure coming from the largest financial entities and global investors, who believe the Tobin tax will increase costs on debt markets and endanger brokerage businesses in Europe. But the U-turn will hit governments in need of higher fiscal income to sustain reforms and find the path towards economic recovery.
In February, the Commission’s proposal had a target of between €30 billion and €35 billion, on which 11 countries agreed. The expected income from stock trade across the 11 states would reach some €4.5 billion with a 0.1% levy. Under the current planned reduction to 0.01%, the total sum would drop to €460 million, from which just Germany and France would get more than €100 million per year.
The Tobin tax is also now surrounded by uncertainty because Brussels hasn’t made public its measures to avoid that investors become the real victims. There is no accord over how the income from the tax will be distributed, either.