Trade Groups Urge G20 to Oppose EU’s Proposed Financial Transaction Tax
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Five global trade bodies have appealed to the G20 to overrule the European Union’s controversial financial transaction tax, arguing that it would have “unprecedented extraterritorial impacts, contrary to G20 principles”. The tax, also known as the “Robin Hood Tax”, is likely to be levied at 0.1 percent on the value of financial transactions and 0.01 percent on derivatives when it comes into effect next year.
Five global trade bodies have appealed to the G20 to overrule the European Union’s controversial financial transaction tax, arguing that it would have “unprecedented extraterritorial impacts, contrary to G20 principles”. The tax, also known as the “Robin Hood Tax”, is likely to be levied at 0.1 percent on the value of financial transactions and 0.01 percent on derivatives when it comes into effect next year.
In a letter addressed to finance ministers of the G20, the trade bodies said that the tax plan “will increase the cost of equity and debt financing for both government and corporate, increase the cost of hedging transactions undertaken in the real economy in order to manage risk, and create further headwind to the global economic recovery.”
The five signatories include the London-based Global Financial Markets Association, the Australian Financial Markets Association, the Japan Securities Dealers Association and the Korean Financial Investment Association.
Noting that every state has the right to impose taxes in its territory, the group argued that the tax would however apply extraterritorially to a vast number of transactions and parties outside of the participating countries.
As it a result it contravenes the Communiqué made by the G20 just two months ago in which states pledged to “monitor and minimise the negative spillover on other countries of policies implemented for domestic purposes”.
They stressed:
[quote] Global markets remain fragile, with many economies experiencing historic levels of unemployment and unusually slow recoveries. Now is not the time to experiment with policies that will fragment markets, increase market volatility, harm savings and impede growth. [/quote]
Last October, the European Commission gave the greenlight for a eurozone “coalition of the willing” to proceed with the FTT, likely to be levied at 0.1 percent on shares and bonds and 0.01 percent on derivatives. The tax is expected to come into effect from January 1, 2014.
Related: European Commission Approves “Robin Hood” Tax on Financial Transactions
While the financial charge is small, the sheer volume of transactions means the total revenues raised could be significant. The Commission has estimated that the “Robin Hood” tax could raise 57 billion euros ($74 billion) a year, if applied across the entire European Union.
But the tax has received fierce opposition from business lobbies as well as the City of London, which argues that the levy would drive businesses away from London to competing markets such as New York, Hong Kong or Singapore. The UK’s position is that the FTT has to be universally levied if it is to work.
The tax plan has also received little support on the other side of the Atlantic. Last week, U.S. Treasury Secretary Jack Lew reiterated the government’s opposition to the FTT, saying that its implementation could be very problematic and flouts international treaties on global trade.
Related: US Rejects EU’s Planned Robin Hood Tax
Related: G-20: Leading The Charge Against Immoral Corporate Tax Practices?
