Sarkozy Champions Tobin Tax Again
Thursday, October 27, 2011

Ahead of the G20 summit meeting in Cannes, French President Nicolas Sarkozy has called for rich countries to accept the introduction of a financial transactions tax to finance development.

Underscoring the need for innovative sources of financing, President Sarkozy said that, at the request of France, Microsoft founder Bill Gates is to present his proposals at the forthcoming summit, due to be held early November under the French presidency.

Rejecting the argument that a levy imposed on financial transactions could only be instituted at global level if it is to work, the French President called for a group of leader countries to adopt the provision without delay.

President Sarkozy underscored his conviction that in the weeks and months ahead, public opinion in those countries without the levy would forcefully question why their governments were refusing such a vital gesture.

Underlining the fact that France and Germany have jointly championed and demanded the levy, Sarkozy noted that the European Commission has now also taken up the gauntlet, deeming it legitimate to demand a contribution from the financial sector.

The proposed tax, announced by the EC on September 28, would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU. The exchange of shares and bonds would be taxed at a rate of 0.1% and derivative contracts at a rate of 0.01%. The tax would apply in all 27 EU member states from January 1, 2014.

However, a financial transactions tax at international level is considered by many to be unworkable, and unless the levy could be enforced globally, which is highly unlikely, critics say that business will swiftly flow to financial centres which do not impose such a tax.

With four out of every five financial transactions in Europe taking place in the UK, and with London’s banks and financial institutions responsible for one-third of the world’s foreign exchange trade, the UK is particularly hostile to such proposals.

"This transaction tax is a job loser and the costs will be borne by the wider economy," says the British Bankers Association. "Financial transaction taxes are not taxes on banks - they are taxes collected for governments by banks. Banks conduct transactions for their customers, therefore any tax on transactions would be an additional tax on customers.”