18 months ago the idea of taxing the banks was being dismissed out of hand. Today the European Commission (the executive body of the EU) outlined their vision for taxing the financial sector. It’s big news.
The EC’s plans for taxation are guided by the firm conviction that the financial sector needs to make a fair contribution to public finances, and that governments urgently need new sources of revenue in the current economic climate.
They have responded to the public mood and the campaigning work of Robin Hood across Europe and taken a significant step towards a Robin Hood Tax. The EU understand taxing big finance makes sense: it can curb dangerous casino capitalism whilst raising tens of billions to pay down our deficit and provide much needed money for the fight against poverty and climate change here in Europe and around the world.
The headline message of the new plans is they recommend two types of taxes. At a global level the Commission supports the idea of a Financial Transactions Tax (FTT), which could help fund efforts to tackle development and climate change.
At the EU level, the Commission recommends a Financial Activities Tax (FAT). An EU FAT a tax on profits and remuneration. It basically works like a VAT on financial services, which incredibly at the moment are VAT exempt. It could generate significant revenue and help to ensure greater stability of financial markets, without posing undue risk to EU competitiveness. Today’s FAT tax proposal could mean as much as £4billion for the UK . This is a welcome first step but we know they can go much further – generating up to £20billion from the sector that sent our deficit through the roof.
However, the EC is wrong to think an FTT needs to be implemented globally to work. The IMF has shown how countries can implement them without waiting for global agreement. In fact, we have a very successful transaction tax on shares in the UK already. The ‘Stamp Duty’ raises more than £3 billion a year and the UK ’s stock market remains one of the biggest and healthiest in the world.
The Commission will present these ideas to the European Council at the end of October and to the G20 Summit in November and we’ll be keeping a close eye on progress and whether money is linked to tackling poverty and climate change at home and abroad.
Today the EC took a step in the right direction, putting people over profit. This should push the British government to do more, and increase their £2bn bank levy.