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The proposed Financial Transaction Tax might just have met its Waterloo

FTTLawyers for the European Council have advised EU countries that the financial transaction tax (aka Tobin tax) which 11 EU members propose to introduce will constitute a breach of EU rules.  The proposal was to tax trades in shares, bonds and derivatives by EU institutions wherever they were in the world, but the new advice points out that this would have involved imposing taxes on countries that have not signed up to the rules.

If the tax goes ahead it will most likely now be limited to instruments issued in the 11 states that support the tax. But if the participating EU members ignore the advice and attempt to impose the residence principle, legal advice suggests they will open themselves to lawsuits for damages running into astronomical sums.  The aim was to apply the tax to all institutions registered in an EU country, no matter where the trade took place.  It would have applied if a UK firm traded in London with local branches of French or German banks.  This would have cost thousands of jobs in the City of London, even though the UK opposes the tax and will not introduce it.  Now it will be far less damaging.

The FTT was always misconceived.  It was not expected to raise significant money, but forms part of an Imperial EU seeking to expand its powers and looking for ways to levy its own taxes directly on EU citizens without having to receive them from governments.  It was supported by a motley collection of economic ignoramuses who think government’s job is to take money from those who make it and give it instead to causes the tax’s supporters approve of.  As originally conceived it would have seriously damaged financial markets and imposed costs even on those wanting to change money to take on holiday.  For this relief, much thanks.  The best hope is that the stupid idea is abandoned altogether.  The second best is that its damage is confined to those daft enough to implement it.

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