How To Commit Collective Financial Suicide
Jeremy Hetherington-Gore Unleashed
12 October, 2008
Everybody, that is, except for the Ecosocial Forum Europe, a supposedly non-party but blatantly socialist think-tank, which indeed probably believes in Lenin as well as the transaction tax.
The Forum claims that a tax of 0.01% across the EU would generate revenues of around EUR82.7bn which could be spent on helping the poor. How to destroy European financial markets in one easy lesson! No-one will notice such a tiny percentage amount, they say. Oh, OK, the foreign exchange markets, which account for 30% of all European financial transactions, won't notice a tax of EUR24bn.
Ah but then the tax can be made global, say these earnest madmen. Do they suppose for one second that Hong Kong and Dubai will agree to such a thing? Who will make them? And what about the Internet?
Of course they're not really that stupid - it's all just another French plot against the British. Since the turnover of over-taxed French financial markets is minute in comparison to London's markets, the French have everything to gain and nothing to lose from a financial transactions tax, otherwise known as a Tobin tax after the economist who came up with the idea.
The last time the Tobin tax was disinterred was in 2004, when Klaus Liebscher, a member of the European Central Banks governing council, stated that use of a such a tax on foreign exchange transactions in order to help fund the EUs budget would have a negative impact on investment within the community.
"A (so called) Tobin Tax would pour sand in the engines of the financial markets, scare away investment, affect economic growth and endanger jobs," argued Liebscher, warning that global investors would be deterred from participating in European money markets as a result of the measure.
The European Commission also knows that the Tobin tax is a non-starter. A report released by the Commission in 2002 dismissed the proposal as unrealistic. An OECD report in the same year concluded that there is no evidence that a tax on currency transactions would achieve its desired effect. The study examined a number of markets where transaction charges have been imposed, and found that the effect on volatility is at best mixed."
"In some cases, there was no appreciable reduction - in others volatility actually rose, observed the report's authors. The OECDs analysis of the tax also concluded that the measure would be unworkable unless imposed on a global basis.
Anyway, relax, it's not going to happen, so the Finance Ministers can forget about it and go back to throwing money at the markets rather than trying to take away what little the poor dears have got left.
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