“Tobin Tax” in 11 Eurozone Nations

The idea of raising an additional tax on financial transactions has been pushed, particularly by the French, as a mechanism of raising revenue from the financial sector which could be used to defray some of the costs of the European sovereign debt crisis. The British were vehemently opposed to any such move since something like 80% of such a tax (had it been EU-wide) would have been raised in the City and the British government was afraid that the additional tax burden would cause businesses to flee from London in search of jurisdictions where the tax would not be applied. Magnanimously, the British said they would happily levy the tax were it to be applied globally, knowing that there was little chance that this would happen, of course.

It would seem that 11 of the UK’s Eurozone partners are made of sterner stuff and have agreed to the implementation of the tax. No doubt, these nations namely France, Germany, Austria, Spain, Italy, Belgium, Portugal, Slovakia, Slovenia, Greece and Estonia, are bracing themselves for the flight of their financial sector for London. The new tax will be levied at a rate of 0.1% of the value of bonds or share trading and 0.01% for derivatives trades. The Dutch have not joined the new tax regime, but have recently elected a new government that is, in principle, in favour of it.

It is also suggested that the new tax may put the brakes on quick, speculative trades which were blamed in some quarters for exacerbating the global financial crisis.

Whilst London will not levy the tax itself, it will be due from investors on the London markets who are based in a signatory nation (the UK already imposes a 0.5% “stamp duty” – or tax – on shares traded in the UK). The measure has been brought in under rules which allow “enhanced co-operation” within sub-groups of the EU and requires no external ratification.