The European FTT: The flaw in the plan


The EU seems to have agreed that it cannot legally apply it to FX transactions. Some of you know the markets much better than I do. I have a feeling that this means that everyone will just create synthetics which include an FX transaction and thus the tax will raise nothing.

Your comments please? Mark T? The others that work in the markets?

6 thoughts on “The European FTT: The flaw in the plan”

  1. Apparently, the Commission is ‘threatening’ to introduce the tax in the eurozone if the UK blocks it for the whole EU. It sounds rather like ‘threatening’ to blow your own brains out if your intended victim won’t let you do it to them. ‘Be my guest,’ is my response.

  2. Hopefully if they now subtract all the lovely consequence-free money they thought they were going to get to spend on their pet projects from FX, they might realise the game isn’t worth the candle.
    My point on the FTT has consistently been that of the three big sources of liquidity flow that they think they can tax, FX, High Frequency Trading and interbank transactions, the first two will transact outside of the eurozone, via derivative products if necessary (so no money ever to be made) while taxing the third will simply produce an absurdly high cost of (but not return on) capital such that all capital raising will move offshore. The speed at which it happens will determine how quickly domestic banking disappears from Europe. Solve the problem of regulating it I suppose.

    The Forbes article you link to also makes the key point – ignored by John Plender’s “insight” article in the FT today- that stamp duty in the UK (which Plender and the Robin Hood Tax types cite as a great example of how it could work) is widely avoided using contracts for difference. Correction, it is widely avoided by high frequency traders and hedge funds, poor old traditional investors like unit trusts and private investors get stuck with it, reducing the return on savings. You don’t raise much tax but the incidence is on exactly the people you are supposed to “like” and avoided by those that you don’t. Watch out for more planted articles like Plender’s though, the b+ggers are nothing if not tenacious

  3. @Phillip Walker

    I also share your sentiments, but perhaps the Commission thinks that Cameron & Osborne are more pro-EU than the rest of us.

    What a ridiculous idea. *cough* (I’m sorry, I think I’ve missed my medication again.)

  4. I read an article a few weeks back which sadly I can not find, it was a few years old and talked about traders creating products in the long run that have nothing to do with the markets there for will be out of the reach of this tax, traders innovate, its simple.

    If I am not mistake the cost to GDP calculated upon 0.1% for stocks and 00.1% for derivatives would be 1.76%, whilst generating a massive 10 billion in tax revenue per year.

    Yet today in the papers its given as 0.5%, hey even old bozo has peaked things up a bit and the revenue is now 55 billion! We also need to do away with member states right to veto proposals…appareantly…

    I can not for the life of me see these individuals, if they manage to impose any form of this tax, letting spot/currency transactions “off the hook”..even if it means there absolute downfall in the west and all the implications that brings.

  5. Well, I have great experience of The City. I have been on many of the largest, most frantic trading floors, in many of the global economy’s largest banking organisations. If you want experience of The City, I’m your man.

    The slight fly in the ointment here is that I was adjusting the air conditioning, making sure the lights worked, investigating a funny smell from that cupboard over there, and so on, but I must say that the people in suits were always ready to hear my economic advice, with their cheery “lingo” like “fuck off” and “will you shut up, I’m trying to corner the market in pork bellies” and “can somebody call security?” and so on.

    So in my experienced view, it seems to me that they’ve run out of tax opportunities. It’s not just this FTT, it’s the whole economy. There’s nothing left to tax. The problem is, they’ve also run out of inflationary opportunities with the currency too. It really does seem to be the case, in my professional opinion, that there is nowhere left to grab money from. The state-backed financial sector appears to have a lot of “wealth”, but that’s mostly M2+, and the M0 is already all maximally tax-exploited, so any attempt to extract more tax, which has to be paid in M0, is deflationary. The government doesn’t take IOUs. I know, I’ve tried.

    Also, you see that VAV above your head? The damper’s stuck. I’ll just get a ladder.

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