A FINANCIAL transactions tax (FTT) will damage the City of London, hurt ordinary people and fail to bring any of the benefits its proponents claim, according to a report out today from a leading think-tank.
The damning report from tax expert John Chown and published by the Centre for Policy Studies urges the British government to take all possible action to stop an EU-backed charge on financial services.
Chown argues the Tobin tax will not improve financial stability, instead reducing liquidity and adding cost in derivative markets, which allow businesses to control risks.
That would hit businesses that use financial services to their benefit, and drive “speculative” activities out of the EU, failing to stop their supposed “destabilising” effect while also failing to raise revenues from them.
Meanwhile the cost of paying the tax could largely fall on the owners – including the state and pension funds – rather than the bankers or traders often blamed by the tax’s proponents.
The report also argues the EU has failed to consider changes in taxpayers’ behaviour if the tax was brought in, and so grossly overestimates potential revenues.
Chown cites the European Commission’s own assessments, which state “the negative impact on the GDP level in the long run is expected to be limited to around 0.5 per cent” – or twice the €57bn (£46.7bn) the tax is expected to raise.
French President Nicolas Sarkozy hopes to implement an FTT in France in August.
The report believes this “would mainly serve to drive business away from France, to the probable benefit of the City of London.”