MEPs back Tobin tax

Scofflaw

The European Parliament has given its overwhelming support to a tax on financial transactions which, it said, could lead to banks paying as much as €200 billion a year in reparations for damage they have caused to the European economy.

While the declaration of support for what is commonly known as the Tobin Tax is non-binding, it will put pressure on the European Commission to draft legislation hitting the banking sector hard.

The parliament backed the proposals by 529 votes to 127.

"We want to send out an institutional signal saying that the private sector bears its part of the responsibility for the crisis," said MEP Martin Schulz, who heads the parliament's socialist bloc said.

The resolution calls on the EU to support the introduction of a global transaction tax but, "failing that, [it] should implement a financial transaction tax at the European level as a first step," it says.

The plenary session of the parliament in Strasbourg heard that the next step should see the commission produce a feasibility study and produce concrete legislative proposals.

The resolution said a tax on transactions including derivatives would reduce speculation and public deficits. It estimated that a 0.05 per cent tax would generate €200 billion a year in the EU alone and over three times that amount if it was introduced at a global level.

The IMF has previously (last year) called for such a tax:

EU leaders agreed in June the union hould lead efforts to set a global approach for introducing systems for levies and taxes on banks.

Semeta said an activities tax would make the sector more stable, raise more revenue and tax financial services more fairly as they are largely exempt from value added tax.

The International Monetary Fund proposed a FAT (Financial Activities Tax) earlier this year to the Group of 20 (G20) leading economies which has agreed in principle that banks, and not taxpayers, should pay for rescues in future.

But the G20, after opposition from the United States, shelved the idea of a common global transaction tax, saying each country should decide how it wanted to make banks pay for bailouts.

Extra bits of the resolution, some of which we'd be happy to see, some of which not:

The resolution also calls for the introduction of eurobonds as a tool for the management of debt across the EU and wants more measures to be introduced aimed at reducing tax evasion and fraud, which are estimated to cost member states an estimated €250 billion annually.

Elements of a separate resolution on tax and development will not go down well in Ireland as it calls on multinationals companies to be banned from "transferring their profits to countries with the most favourable tax regimes" and says they should pay taxes in the countries where they generate the profits

MEPs also backed an effective ban on “naked” short selling" of securities across Europe. The practice which sees speculators bet on a fall rather than a rise in the price of a security to make a profit, and "credit default swaps", essentially to insure against a state defaulting on its debt obligations, were both heavily implicated in Europe's recent sovereign debt crises.

A draft law which will prohibit the trade in credit default swaps related to sovereign debt unless an investor has a long position in the debt or equivalent assets was backed by 34-to-eight vote.

The Labour Party supports such a tax, I believe.

cordially,
Scofflaw

RichardAnd

Interesting, does this mean the days of the "double irish" are coming to an end?

As to the tax on transactions, I've heard that mentioned before. Some charity figure head wanted such a tax brough in and the income generated given to the 3rd world.

silverharp

I love the scapegoating of speculators, you know the establishment is clutching at straws rather then looking at the real issues when they blame short sellers. Greek rates are at 15% today, the bond players were right to close Greece out

Scofflaw

silverharp wrote: »

I love the scapegoating of speculators, you know the establishment is clutching at straws rather then looking at the real issues when they blame short sellers. Greek rates are at 15% today, the bond players were right to close Greece out

There seems to be a certain confusion in that between being technically right and morally right?

cordially,
Scofflaw

Cookie_Monster

So customers will simply be forced to pay more bank fees to cover this tax and the banks will maintain their profits.
I suppose IF the money is ring fenced and protected and only used for such bailouts it may be valid but I wonder if it really would be.

MEPs also backed an effective ban on “naked” short selling" of securities across Europe. The practice which sees speculators bet on a fall rather than a rise in the price of a security to make a profit, and "credit default swaps", essentially to insure against a state defaulting on its debt obligations, were both heavily implicated in Europe's recent sovereign debt crises.

Why not go the whole way and ban all that derivative nonsense, make everyones lives a little easier

Scofflaw

Cookie_Monster wrote: »

So customers will simply be forced to pay more bank fees to cover this tax and the banks will maintain their profits.
I suppose IF the money is ring fenced and protected and only used for such bailouts it may be valid but I wonder if it really would be.

Indirectly, perhaps, but it's not a tax on financial transactions such as paying your ESB bill. It's a tax on buying and selling bonds, derivatives, etc, so a lot of institutions paying it will not be retail banks at all.

cordially,
Scofflaw

Dannyboy83

Interesting stuff.

How does their proposed 'Eurobond' differ from our view of how it should work I wonder?

southsiderosie

So would both parties to a transaction have to pay a tax? How would this be structured so half of the EU banking industry doesn't up and move to Hong Kong?

I'm not opposed to this in theory, and if bank bailouts are going to be a permanent fixture then there needs to be some other way of paying for them (or preventing them). But I also worry that this is basically admitting defeat: the banks have become too big/politically powerful to control directly, so we'll just have to plan to bail them out every 10-15 years?

silverharp

southsiderosie wrote: »

So would both parties to a transaction have to pay a tax? How would this be structured so half of the EU banking industry doesn't up and move to Hong Kong?

I'm not opposed to this in theory, and if bank bailouts are going to be a permanent fixture then there needs to be some other way of paying for them (or preventing them). But I also worry that this is basically admitting defeat: the banks have become too big/politically powerful to control directly, so we'll just have to plan to bail them out every 10-15 years?

it all comes down to leverage, the Lebenese central bank got it right, banks had to have cash reserves of 30%. The banking system doesnt need a tranaction tax which will be spent. it needs tough leverage rules and a funded insurance scheme. Also it should not be risk free for depositors to keep funds in agressive banks versus conservative ones.


http://news.bbc.co.uk/2/hi/middle_east/7764657.stm

southsiderosie

silverharp wrote: »

it all comes down to leverage, the Lebenese central bank got it right, banks had to have cash reserves of 30%. The banking system doesnt need a tranaction tax which will be spent. it needs tough leverage rules and a funded insurance scheme. Also it should not be risk free for depositors to keep funds in agressive banks versus conservative ones.


http://news.bbc.co.uk/2/hi/middle_east/7764657.stm

Thanks for the link, but that article makes it seem like the Central Bank there also has a lot of say in how banks invest their money - which would be more difficult if a country didn't have the constant threat of war and instability that Lebanon has.

I guess it is a question of preventing failure in the first place versus having a system in place for if and when banks fail. It seems like the latter could potentially create a great deal of moral hazard.

I think I would prefer to see something like the type of regulation that exists in Canada. Perhaps the best thing for consumers and banks alike is for banking to go back to being a boring, but stable industry.