New study shows Robin Hood Tax would boost growth

The introduction of a Financial Transaction Tax (FTT) in Europe could benefit the European economy and raise the level of growth, according to a study written by two prominent economists, Professors Stephany Griffith-Jones and Avinash Persaud.

Professor Stephany Griffith-Jones confirmed the benefits of an FTT. Among them, she said: "The [European] Commission has calculated that it would only have a -0.2% effect on growth. It takes into account the fact that a very small part of investment by credit companies would actually be taxed and that high frequency trading would be decreased.”

"But, in our study, we argue that an FTT would also contribute to reduce the risk of a future crisis. When this is taken into account, you obtain a positive effect on growth of about a quarter of a percent".

Professor Stephany Griffith-Jones rejected the argument that the tax would not be feasible because of fraud: "In the past, the same was said about income tax, which is indeed avoided but which still raises a lot of money", she said.

The report highlights how the previous impact assessment by the Commission did not include some of the most important aspects of the implementation of an FTT. These positive effects include; the reduction of systemic risk, the disincentive for risky high frequency trading and the potential role in minimising tax avoidance and evasion.

The paper also disproves the suggestion that an FTT would hit pension funds or pensions, and urges the European Commission to use the model of  the UK stamp duty to prevent evasion by forum-hopping, rather than the Commission’s current proposal of a ‘residence principle’.

Read the full report >>