7 Oct 2011
Tobin tax would hit recovery
Regulations being proposed and imposed on the financial world are coming thick and fast. Some aim to provide greater oversight and transparency to prevent another crisis; some are seemingly to appease taxpayers. This "Tobin" tax ("Treasury vows to oppose Barroso's plan for 'Tobin tax' ", 28 September) falls into the latter category.
While there is an obvious need to reassure the taxpayer that banks are playing their part in the economic recovery, this is a short-sighted headline-grabbing initiative which I believe will result in Europe being a less competitive market place across industry – not just banking.
George Osborne must continue to oppose the financial transaction tax, for the benefit of the UK's recovery and to guide Europe in the same direction. Unless the proposed tax is implemented globally, it will drive financial services from the UK and Europe, to the US and Asia.
The affected markets will become less liquid. This will mean less tax revenue, and less liquid Eurozone markets will also look like a less attractive place for issuance and primary market activity, so there is a potential knock-on impact on businesses and institutions locally funding their Eurozone investment projects.
It is astounding that the EC is proposing a unilaterally implemented fundamental change to market operation which distances Eurozone markets from other continents. Surely the simplest and safest route to tax financial institutions, especially if promoting transparency is a serious ambition, is a financial institutions tax, tailored to size and type of institution, rather than interfering directly with market operation.
David Holcombe, Specialist in Trading, Rule Financial, London EC1
To view the original article on The Independent website click here.
