Tobin Tax claims first 11 victims


Eleven European Union country members have agreed to implement the Tobin Tax or FTT on financial transactions, with a 0.1 percent rate for stock trading and 0.01 percent for derivatives. But among those who have rejected it, there is the nation that hosts Europe's financial centre, the UK: London says, and rightly so, that this tax will only push the financial services industry out of Europe unless the rest of the world decides to apply it, too. And in this case, London's position makes a lot of sense.

The UK will never accept a levy that could hurt its main industry. This tax rates may seem negligible, but profit margins are tight on the wholesale market–which sets the minimum costs for operations on the retail market–, and the FTT will undoubtedly oust some banks and financial institutions to other locations free from such regulatory punishments. Right now, this is exactly what Europe doesn't need.

The sector will cut even more jobs, and banking services users will be affected, too, as banks will see an increase in the costs of funding their lending.

De-localisation caused by excessive fiscal pressures is a well known side effect. The eurodollar market, for instance, is a clear proof of the damage that over-taxing exerts: the US banks, from their own American base, established after World War Second a parallel market in Europe in order to avoid constrictions at home. A eurodollar was, and is a dollar off US banks' balance sheets that goes out to subsidiaries in foreign countries seeking higher profitability.

The FTT will hardly stop wild speculation, as their champions claim, but will raise financial transactions costs and reduce banks' profits at a time when recapitalisation and provisioning is urgent to normalise the markets.

Some of the money diverted from the private sector will end up in the government's hands, that is true. Yet, our politicians haven't exactly demonstrated that they can manage these new resources in a better or wiser way than they have done so far. This is plainly wrong.


About the Author

Miguel Navascués
Miguel Navascués has worked as an economist at the Bank of Spain for 30 years, and focuses on international and monetary economics. He blogs in Spanish at: http://