The Tobin Tax; Less profitable to invest from the EU starting 2017

The Tobin Tax; Less profitable to invest from the EU starting 2017

The Tobin Tax

There are 10 members of the euro that are driving a new tax on financial transactions. These announcement will have come Tuesday as a basic agreement on the main lines of the called “Tobin tax”, which should apply from 2017. However, the group of countries, among which are Spain, France, Germany and Italy in others, have left so far out some key elements, such as setting the exact percentage that purchases and sales of shares will be recharged.

According to the text presented today at the meeting of Ministers of Economy and Finance of the EU, it is envisaged that all transactions with shares traded intraday and operations of all negotiators are taxed, except for agents and members clearing houses (when acting as facilitators). The ten countries argue that the tax “should be based on the principle of the broadest possible base and low rates, and should not impact the costs of sovereign debt.” This point, to leave government bonds, was a red line set up by for the Spanish government.

Another complex elements of the debate of this European Tobin tax was the territorial scope. If a country applies the tax, does support all the shares issued in that country? Or all purchased by residents of that country, whatever the origin of the company that issues them? In principle, the draft agreement points to a combination of the principles of residence and emission. But at this point, he said the introduction of the text, it is trying to determine “whether it is more sensible” to start pricing the shares issued only in countries that are within the agreement.

Countries like the UK opposed to the measure of taxing financial transactions due to the importance of London to the country as a financial center. If these kind of taxes are imposed in a place like London it could be the end of the world’s leader in the financial sector.

Analyze “the effect” on pensions

Finally, in order to maintain liquidity in markets suffering from lack of liquidity, according to the preliminary text that can implement a “limited” exemption. Add a little epilogue that still have to study the effect of the tax on the “real economy” and the pension schemes, as well as “viability” rate in each country.

Although the agreement is summarized in a single page and in very general lines of action, it is an improvement to a process that seemed doomed to remain frozen. “It’s an important and probably essential step to end” work on after four years of negotiations rate, said Austrian Finance Minister Hans Jörg Schelling, in the public debate of Ecofin, as recorded by EFE.

The Luxembourg Minister Pierre Gramegna said that it is a “transitional step” and that the document will now have to be transferred to a legislative text. The aim is to reach agreement on a final text until the summer, said European Commissioner for Economic and Financial Affairs, Pierre Moscovici, preferably in June.
To conclude,  it has to be mentioned that if the EU starts rising taxes in financial transactions, the big firms will move their financial profits to other countries where won’t be charged any extra commissions and from where financial security it can be provided in the same level as in the EU. The solution it is not to charge extra taxes to the small investors who can not move their fiscal residence. The solution is to make fair taxes for all citizens which everyone feels comfortable with. We don’t want taxpayers who avoid paying taxes.