A TAX on financial transactions would be “economic suicide” according to a study published this morning by a leading Westminster think tank.
The Tobin tax, set to be tabled at the European Union in September, would drive jobs away from the City to lower-taxed parts of the world, the Adam Smith Institute (ASI) argues.
The adoption of a Tobin tax in Sweden in 1984 drove half of its equities to London by 1990, the report states. The City’s “enviable status as a financial centre would be devastated if a politically motivated but economically flawed Tobin tax was introduced,” the ASI said today.
The adoption of an EU-wide levy has been pushed in Brussels by the Robin Hood Tax campaign. The group dismissed the ASI’s findings as “scaremongering” today, yet faces strong opposition from the financial sector, as well as from business groups such as the CBI.
Accountant BDO yesterday dismissed the claim that the tax would raise €200bn for governments as “highly optimistic”.
“Taxpayers should also be concerned as to whether this could, in fact, decrease the tax base and further slow Europe’s growth prospects,” the group said. If the tax is limited to the EU, rather than implemented globally, it could “push market liquidity, business and related jobs to countries which do not impose such a tax,” BDO said.
The ASI added that the levy could in fact worsen market instability.
European leaders Angela Merkel and Nicolas Sarkozy (left) endorsed the tax on Tuesday.