The FTT’s time has come
Despite UK Prime Minister David Cameron’s attempts to bury his head in the sand over the prospect of a financial transaction tax (FTT), its supporters are growing.
When economist James Tobin first proposed a tax on currency transactions in 1972, few in the mainstream seriously considered they would one day see a multinational FTT. Forty years later, as the 27 EU member states prepare to vote on the European Commission’s proposal for an EU-wide FTT, the FTT is an idea whose time has come.
With Cameron wielding the axe of a UK veto over the FTT, it is unlikely that we will see an FTT rolled out across all of Europe in the near future. But the Commission’s proposal remains the single most significant step towards development activists’ dream of a global tax on financial transactions.
France has already pushed ahead with its own version of the FTT and the new President, Francois Hollande, looks set to be an even more vocal supporter of a broader, EU-wide tax than his predecessor. Hungary too is introducing an FTT, and with Germany, Spain and Italy, – whose Prime Minister Mario Monti was once a student of Tobin’s – four of Europe’s five biggest economies now support the tax. The UK stands alone.
While an EU-wide FTT looks set to be blocked by the UK, Algirdas Šemeta, commissioner for taxation, customs union, audit and anti-fraud, at the European Commission, revealed in an interview with International Tax Review that if agreement cannot be reached between the 27 member states, the FTT could progress under enhanced cooperation with the Commission’s assistance.
The result is that a eurozone FTT is a very real possibility. But even beyond Europe, the tax is gathering support.
Delivering his report to the G20 in Cannes last year, Bill Gates threw his considerable weight behind the FTT. Unanimous G20 support remains a distant prospect as long as the US remains opposed, but if the Gates Report shows anything, it’s that the FTT is no longer a topic of fringe discussion among socialists, but an idea endorsed by one of the world’s most successful capitalists.
Meanwhile, the UN’s independent advisers on extreme poverty, food, business, foreign debt and international solidarity all backed the FTT last week and have called upon the Commission to lead by example by rolling the tax out across the eurozone. The UN estimates that if the EU’s version of the FTT is extended to the G20, it could raise up to $250 billion a year.
Magdalena Sepúlveda, UN special rapporteur on extreme poverty and human rights, believes the FTT could help countries reduce their deficits, but argues the revenue should also be directed to fighting poverty, reversing growing inequality and compensating those whose lives have been devastated by the economic turmoil.
Financial institutions are understandably nervous about the prospects of an FTT, and many argue that the sector already pays its fair share of tax and the burden will only be passed onto customers, but these objections are increasingly falling on deaf ears.
The FTT will always be most effective at a global level. But Hollande’s election in France marks a turning point in European politics from the austerity endorsed by Cameron, to growth promoted by spending and taxation. And as long as the EU’s citizens continue to feel the pinch of public service cuts, and as long as they perceive that banks have been given an easy ride, calls for an FTT are only going to grow and more and more governments will be forced to take notice.