The Economist on a FTT

April 3rd, 2013 at 7:00 am by David Farrar

The Economist looks at the history and pitfalls of an :

A group of 11 European Union member states, among them France, Germany and Italy, wants to impose a 0.1% on equity and debt transactions, and a 0.01% charge on derivatives transactions. These countries are pressing ahead on their own because other EU members, including financial hubs like Britain and Luxembourg, are opposed. …

The rates proposed sound negligible, but the tax would be imposed at each point in the transaction chain. A 0.1% rate therefore translates into something much bigger as securities move from seller to buyer via financial intermediaries. Even the headline rates are less innocuous than they look. A 0.1% charge on repo transactions, a way for banks to finance themselves overnight, turns into a 25% charge over the course of a working year. A 0.01% tax on a derivative trade sounds small, but is a hefty increase in costs given the large notional amounts involved—up to 18 times more than current costs in the most liquid markets, according to one calculation.

And how have they worked in practice?

After Sweden levied an FTT in the 1980s, 60% of trading volume in the most actively traded share classes moved to London; the tax was repealed in 1991.

It will send capital fleeing offshore.

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3 Responses to “The Economist on a FTT”

  1. KiwiGreg (3,218 comments) says:

    FTT appeals to some because many (most?) people dont understand capital markets. They therefore assume they have no or limited value and that taxing them wont cause harm (and will fuck over those fucking speculators).

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  2. expat (4,048 comments) says:

    greg, most people working in financial markets don’t understand financial markets ;)

    anyway if you are againts FTT you must support that b@stard money trading shylock ;)

    (just getting in before yoza)

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  3. Black with a Vengeance (1,704 comments) says:

    Beats selling state assets to raise some cash.

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