Although it was barely noticed by the American press, on January 22nd, EU finance ministers approved a new "Financial Transactions Tax" (FTT) that has implications for market competitiveness around the world.
The move was conceived as a Franco-German initiative and was supported by seven other EU nations, including the entire bloc of highly indebted southern tier nations, to reach the minimum nine nations required to press ahead under the EU's so-called, 'enhanced co-operation procedures'. If at least one of the transacting parties involved is an EU resident, the tax will impose a one tenth of one percent tax (on both sides of a financial transaction) on secondary market trades in equities, bonds, securities and REPOS. Derivatives will be taxed at a lower one hundredth percent.
Although limited presently in scope and at an apparently low rate, the tax will nevertheless provide an extra layer of financial bureaucracy that will dissuade some market participants from transacting in the Eurozone. It should be patently obvious that transactional fluidity is supportive of efficient markets and ultimately of economic growth. It is only in the poisonous, anti-capitalist, post-crisis environment that such a measure could be passed. More importantly, the measure is a "supra national" tax that helps to pave the way towards a global taxation system. Not only will such a system be economically damaging, but it will be devoid largely of effective democratic accountability.
In its March 2011 tax meeting in Brussels, the EU had originally proposed a "Financial Activities Tax" (FAT), a more comprehensive, and potentially more destructive, EU-wide measure. The opposition to the tax was so fierce, most notably from Great Britain, that the FTT was proposed as a compromise.
Ignoring the role of the central banks in the financial debacle, the German Finance Minister commented lamely that, "The financial sector must appropriately participate in bearing the cost of the financial crisis." According to the EU's Tax Commissioner, Algridas Semeta, the FTT decision was a "major achievement for EU tax policies." Those who believe, as I do, that the EU's covert intent is to erode the traditional independence of the world's financial markets, particularly the dominance of London and New York, certainly share those sentiments.
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