The tax would be a tiny percentage of the value of a trade in assets like stocks and bonds. Although some countries already have a minimal duty on share trading, the new proposal would not only increase the scope and size of the tax but also siphon off some revenue to Brussels.
The European Commission has formally backed the tax to take effect from January 2014.
As a result of the financial crisis in 2008 and the ensuing recession, debt levels across Europe, and not just in the bailed out countries of Greece, Ireland and Portugal, have risen sharply. Across the 27-nation EU, debt as a percentage of national income has spiked from below 60 percent in 2007 to 80 percent this year.
Though the tax could dent growth and employment, it has won a fair degree of support across the 17-country eurozone, including France and Germany, the EU’s two biggest economies.
Britain, however, has been adamantly against it unless it is used on a global basis. Its opinion carries weight in the debate because London is the continent’s biggest financial center.
The argument made by the likes of George Osborne, Britain’s finance chief, and echoed last week by his counterpart in the U.S. Timothy Geithner is that the tax just won’t work if it’s not introduced globally. If it’s not, investors can move money quickly to where the tax doesn’t need to be paid, saving themselves potentially large sums of money in financial trades.
Howard Wheeldon, a senior strategist at BGC Partners, said it’s a bad idea to have a trades tax now, especially since many banks are still trying to meet new requirements to beef up capital buffers.
“The timing is inappropriate; it’s something to look at in a few years time,’’ Wheeldon said.
Even if Britain and the U.S. decide to opt out, it is possible that the eurozone countries, or at least some of them, may go it alone.
