THE FINANCIAL transactions tax (FTT) planned by 11 EU countries risks devastating the countries’ banks and leaving them dependent on central bank funding, Bundesbank chief Jens Weidmann warned yesterday.
It came as a European Commission document emerged showing the states backing the tax have serious doubts over its implementation and the negative side effects.
And new figures from Hungary show its FTT has raised just half of the expected revenues in the first two months of operation.
The tax is supposed to hit all trades of shares, bonds and derivatives if they were issued in any of the countries, or if they involve a party based there.
Germany and France are leading the group, but serious doubts have emerged over the viability of the levy.
“From a monetary policy point of view, the financial transactions tax in its current form is to be viewed very critically,” Weidmann said. “Some effects cannot be seen immediately but can turn out to be explosive. An example of this is the planned financial transactions tax.”
Meanwhile a document, published by OpenEurope, shows the states are worried about issues ranging from who will collect the tax overseas, to how it might hit their own borrowing costs.
In particular the states called on the European Commission for estimates on whether the revenues from the charge would outweigh the increase in the cost of borrowing.
And they fear few other countries would help them gather the levy.