The concept of a financial transaction tax has caught the imagination of politicians as an effective way of righting the wrongs of the financial crisis. But its implementation is fraught with complexity, says David Wigan.
Among the regulatory initiatives to be introduced since the
financial crisis, none has elicited as much passionate debate
as the European Commission’s proposal to introduce
a tax on financial transactions.
The tax has been endlessly discussed by central banks,
politicians, lobby groups and market participants, while
opposition to the tax has become a cause celebre which unites
the financial industry. However, with new European parliament
proposals recently published, and some countries ploughing
ahead with their own initiatives, there is little evidence that
Europe’s politicians are ready to
The rationale for a tax on financial transaction, as presented
by the European Commission is disarmingly simple: The financial
industry has caused untold amounts of trouble over recent
years, resulting from poor investment decisions, mis-selling
scandals and shady pricing practices. That has cost European
economies huge amounts (estimated by the EC to be €4.6tr)
and in the view of regulators, the industry must pay its
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