European Parliament backs report calling for a Financial Transaction Tax

Knowledge brokering08 Mar 2011

Today the European Parliament voted to back a report calling for a Financial Transaction Tax (FTT) even on a unilateral basis to raise money for public goods, including development and climate change. The report was backed by MEPs from the whole political spectrum.

The Podimata report suggests a tax of between 0.01 and 0.05 per cent on all transactions to avoid flows towards less regulated parts of the financial sector. The European Commission is currently carrying out an impact assessment of the proposal. The Commission supports the FTT at a global level but in the past has suggested that if such a measure is only to be introduced at a European level it would prefer a Financial Activities Tax targeting remuneration of financial service companies.

The Broker wrote in a Special Report Taxing Global Public Bads in October 2010 that one of the positive outcomes of the recent financial crisis is that it has rekindled interest in the idea of introducing a global financial transaction tax. The idea, first promoted by civil society groups, gets more and more support from a number of world leaders, including French President Nicolas Sarkozy who this year is chairing the G20.

In the special report the question was raised why not tax global public bads to fund public goods? ‘Taxing public bads would yield a double dividend. In the first place, it would generate income that could be used to achieve development goals and mitigate climate change. But the added benefit is that it would stabilize financial markets.’