The European Parliament voted today – by a thumping 487 to 152 – for a Europe-wide Financial Transactions Tax (FTT) to be implemented by 2014, as part of a wider growth strategy. They couldn’t have sent a clearer message to the EU leaders who are meeting this evening in Brussels to discuss the Eurozone crisis, growth and possible solutions like an FTT. The Robin Hood Tax (as the FTT is called in some EU countries like Britain) has been placed on the EU Summit agenda by the new French President Francois Hollande. Having raised it this weekend at the G8 summit in the USA, Hollande has made it clear he is at least as committed as his predecessor, and it is a proposal backed by four of the five biggest economies in the EU – Germany, Italy and Spain as well as France.
David Cameron is a lone voice among the big five in opposing the tax. He told Hollande in Washington that an FTT would do nothing to stimulate growth which is staggering for a Prime Minister who has presided over the VAT increase , the pasty tax, the caravan tax… Apparently taxes on ordinary people are fine, but taxes on Cameron’s friends and funders in the City of London are unacceptable!
But in any case, he is wrong. The European Commission’s latest impact assessment suggests that, while the tax itself could reduce growth by 0.004% a year, if the revenues raised were re-invested in the economy, European growth would be raised by 0.2% to 0.4% – which may not be huge but it would bring the UK out of the recession that David Cameron’s government have plunged us back into. Independent estimates of the impact both of the revenue and the changes in market behaviour (a Robin Hood Tax would reduce the incentive to gaamble and speculate, and therefore encourage more long-term investment in infrastructure and manufacturing) suggest an FTT would produce even more growth than that.
The European Parliament was voting on a report from its Economic and Monetary Affairs Committee about the European Commission’s draft directive on FTT, although it is only advisory as the Parliament does not have control over tax policy. The report recognised that countries like the UK might not join in with the first wave of implementing the tax, and urged a smaller group of EU countries to get on with implementation regardless. It also proposed exempting pension fund investments, and extending measures to tackle tax evasion and tax avoidance.