'Robin Hood' tax battles in EU

 
City of London City of London: How would global finance react to a tax on trades?

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In the heat of the eurozone crisis, when the European project was in danger and weak countries were being bailed out with billions, there was gritted-teeth determination to make the bankers pay in the future.

For many the root of the crisis lay with the greed of the bankers, rather than the design of the euro or the speculative bubbles built up in countries like Spain and Ireland.

After all, the Celtic Tiger had been brought to its knees when the government took onto its books the debts of the banks and nearly bankrupted itself. It was often repeated at the time that in future crises the banks would take the strain and not the taxpayers.

In this atmosphere an idea was revived. It was the Tobin tax, first proposed by the American economist James Tobin 40 years ago. He suggested taxing all payments from one currency to another, to curb massive destabilising movements of funds.

In the eurozone an idea gained traction of levying a small charge on trades in equities and bonds across the EU's markets.

Tax on 'speculation'

Initially the German Chancellor, Angela Merkel, was not persuaded. It made little sense to her. The French - and particularly President Francois Hollande - were enthusiastic. After all, he had declared in 2012 that "my real adversary is the world of finance". But in Paris, at the highest level, there were doubters. The Governor of the Bank of France, Christian Noyer, warned the tax posed a very real risk to the economy and could destroy businesses and jobs.

Last year Angela Merkel's enthusiasm was rekindled. Her coalition partners, the Social Democrats, made a financial tax a priority - it was some red meat that could be offered to their supporters. So Mrs Merkel and Mr Hollande teamed up and a total of 11 countries backed imposing the tax.

There was pressure, too, from elements within the European Parliament. Some Socialist supporters said the "Robin Hood" tax - the Financial Transaction Tax (FTT) - was necessary "to make speculation and casino capitalism less lucrative".

The UK was against the tax. They thought it would never work unless it was imposed by the G20 and levied globally. Otherwise financial centres like London would lose out to New York or Singapore.

London was most concerned that this tax could be imposed on UK firms trading in those EU member states that had agreed to it. So a precautionary legal challenge was mounted.

The expectation was that it would take the European Court of Justice a year to give an initial judgement. That ruling has been brought forward, unexpectedly, to Wednesday this week.

London dealer's desk at Nat West Bank - file pic A London stockbroker: The City dominates financial services in the EU
Defending the City

There is widespread speculation that the court will find against the UK. This should be seen as part of a process, and other legal challenges may follow.

The court's decision, however, will matter - firstly on the political level. Some will see the ruling as a test of the UK's influence over matters deemed important to its key interests. Some politicians may seize on the ruling in the run-up to next month's European elections.

Secondly, a rejection of the UK's case will give weight to those voices arguing that the FTT would be disastrous for the City, damaging the money markets and increasing the cost of finance.

Chancellor George Osborne has described it as "not a tax on banks and bonuses, but a tax on pensioners and people with savings and investments".

So disputes about the FTT could be folded into the wider argument over Britain's relationship with the EU.

On the one side would be the French and Germans and others wanting to rein in the speculative appetites of the bankers, and divert funds to ease future crises. And on the other the British, determined to defend the City of London.

 
Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    +5

    Comment number 23.

    Or just make bankers personally responsible for any losses they make. I'm sure they will all choose the tax if presented with this choice.

  • rate this
    +5

    Comment number 22.

    I can thole clever bankers earning good salaries and big bonuses as long as they pay tax at the same level as the rest of us.

    The Tobin tax is not about penalising them, or indeed pensioners and savers, it is about applying a minuscule levy - in the order of 0.005%, or 5p per £10,000 to the algorithm-driven high frequency (4000 per minute) trading that pervades the markets.

    It's a good thing!

  • rate this
    +4

    Comment number 21.

    Best thing to do ....NOWT don't apply it if it comes in a bit like the French are always doing and by the time they get serious we will no longer be in the club....

  • rate this
    0

    Comment number 20.

    Chancellor George Osborne has described it as "... a tax on pensioners and people with savings and investments".

    He means rich people.

  • rate this
    -8

    Comment number 19.

    This tax will not be implemented. This will annoy the Putinites at UKIP

  • rate this
    +13

    Comment number 18.

    This is how the banking system works:

    - Government creates a bond to demand the printing of money.

    - Bond passed to Federal bank that prints money.

    - Money is deposited in banks and 9/10ths (Fractional Banking Rule) is loaned to the public at interest.

    - You and I pay the loan with interest on money that came of of thin air and didn't belong to the bank anyway.

    This is the banking scam!

  • rate this
    +3

    Comment number 17.

    Messy, however you look at it.
    Its all about power and greed.
    My two penneth is the sooner
    the Eu is off our back the better,
    and failed,corrupt incompetent
    business(banks) should not
    be bailed out. How about
    some honesty!

  • rate this
    +4

    Comment number 16.

    We don't want to drive the financial sector away, but merely to rein in its excesses. The crises developed because of the way money is shuttled rapidly round the globe. A 0.1% tax per trade may not sound excessive, but at 10 or more trades per day that's a whopping tax rate, and should encourage more long term thinking on the part of the maverick dealers.

  • Comment number 15.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +61

    Comment number 14.

    Why don't we start with applying the law to bankers?

    Even though most laws are written for them, they still manage to break a few as well.

    Money Laundering for drug cartels? zero convictions.
    PPI? zero convictions
    LIBOR? zero convictions

    Seriously, why?

  • rate this
    0

    Comment number 13.

    Taxing bankers is always right. Huzzah.

  • rate this
    +2

    Comment number 12.

    Boarder Terrier@10
    I agree.
    Applied globally or not at all.
    If the EU insists, we leave.
    Alan

  • rate this
    +3

    Comment number 11.

    Key point from GH in this piece is that this is a test on whether Westminster can stand against the EU.

    Notwithstanding the unpopularity of bankers & financiers, LibLabCon all quietly know that without the tax return from the city, the economy loses about £200bn pa.

    Therefore, a cross-party Westminister must fight the EU over this.

    But it's a fight they will probably lose.

  • rate this
    +7

    Comment number 10.

    Impose the tax globally, not just the EU. I guess that wouldn't be workable.

    By applying this tax in the EU only its is a bit like creating a handicap for any EU financial institution competing in the global financial markets. New York is just going to love it...

  • rate this
    0

    Comment number 9.

    How do you tax something that doesn't exist that is purchased with fictional electric money?

  • rate this
    0

    Comment number 8.

    6. David Horton
    Suggest you swiftly slip in a few insults about UKIP, and big up the EU & Salmond, like all your colleagues do.
    _____

    It is ironic that on one topic people moan about bankers and on another they defend those same bankers just because their myopic hate of the EU is bigger. You have to be stUKIP to vote UKIP.Nothing more dangerous than stupid people.

  • rate this
    -2

    Comment number 7.

    Bank transactions already raise billions in tax.
    The 'Robin Hood tax' is just another populist vote winning ploy aimed at the majority of the population who don't know the facts about banking.

  • rate this
    +2

    Comment number 6.

    @BBCGavinHewitt via Twitter
    So far from Alex Salmond no mention of the euro which Scotland if it became a new EU state would be obliged to stand up to
    --
    Gav mate, you are off message.

    Haven't you seen the BBC memo that requires you to be completely pro EU & pro-Scottish independence?

    Suggest you swiftly slip in a few insults about UKIP, and big up the EU & Salmond, like all your colleagues do.

  • rate this
    +4

    Comment number 5.

    The thing is, some of these corporation suits & bankers may be detestable thieving irresponsible parasites, but they do pay tax and they pay it here. Billions of it.

    If the EU gets it's way, then the same bankers will be equally detestable, but pay billions in tax in someone else's country. Probably Germany or France.

    We should prioritise our list of evils.

    Rhinoectomy to spite face (sic)

  • rate this
    +23

    Comment number 4.

    Watch how quickly the City throws its full weight behind the anti-EU forces if this tax is imposed on them. Ironic that an EU tax may preserve Britain's independence.

 

Page 23 of 24

 

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