By Carlos Díaz Güell, in Madrid | The Tobin tax (a tax proposal over the flow of capital and which is causing divisions in Europe after being flatly rejected by Britain, America and China) was invented by a liberal, defended by the left, and is now a priority for the right.
Publicly presented by the liberal economist James Tobin, it sought
“to throw grains of sand in the gears of the too well-oiled mechanism of international finance”
and thus curb the increase in short term speculation. The percentage rate put forward by Tobin ranged from 0.05% to 0.2% although the only country that applied it was Sweden in 1984, when it decide to tax all stock market transaction by 0.5%. The Swedes had to abandon the initiative six years later due to the flight of capital it triggered. Today, Sweden is diametrically opposed to the introduction of the so-called Tobin tax…
Until now, Paris thought to move forward with only the Euro countries ‘to lead by example’, while Berlin favoured seeking a compromise at a wider European level (which was not possible with London). Paris proposed that the rate be 0.1% in the case of bonds and of 0.01% for more complex derivatives.
For the Austrian Institute of Economic Studies, an overall rate of 0.05% on financial transactions could generate annual revenues of close to 1% of the world’s nominal world GDP, which would cover about half of the additional fiscal resources which are mobilised each year by the G20 countries and are implemented in anti-crisis measures and annually account for 2%. A tax of this nature may have its raison d’être if implemented globally or at least across the EU as German leader Angela Merkel argued against her French counterpart Nicolas Sarkozy’s thesis (expressed at the G20 Summit in Cannes) that pointed out that the tax was
“technically possible, financially necessary and morally unavoidable.”
Opposing France’s president, and somehow more critic than Spain’s president Mariano Rajoy –who is rumoured to have openly backed the tax in exchange of French support when Spain asks for a seat in the board of the European Central Bank– the Danish presidency of the EU (that is not part of the Monetary Union and does not share the currency) rejected a few weeks ago France’s position by reminding that the studies carried out by the Commission itself show that the introduction of a tax only in Europe could cost the continent half a point in economic growth and hundreds of thousands of jobs due to the relocation of banking and financial activities outside the EU.
A similar position has been maintained by the UK, whose prime minister David Cameron has reiterated its opposition to the measure unless it is applied globally, arguing that the measure would be effective only if it were imposed worldwide and that otherwise it would cause a relocation of operations and businesses to third countries that do not impose the tax.
The Tobin tax’ life looks as complicated as ever.
* Carlos Díaz Güell is editor at consensodelmercado.com