EU Move Towards Financial Transaction Tax Paints 'Grim Picture for Growth'
Although it results in no binding agreement, the European Parliament’s vote in favour of an EU wide Financial Transaction Tax delivers another crippling blow for those promoting growth across the continent, as politicians appear blinded to the colossal implementation issues, according to Frédéric Donnedieu de Vabres, chairman of Taxand, a large organisation of specialist tax advisors to multinational businesses.
“This type of blanket tax would be complicated to instigate across the EU requiring a fundamental overhaul in country-specific tax policy. Implementation remains a significant stumbling block with no clear agenda outlined to prevent the tax ultimately being passed on to the clients of financial institutions. Questions also remain over determining the country of establishment for a particular transaction,” said Donnedieu de Vabres.
He argued that the support for a financial transaction tax is being propelled by a number of increasingly blurred and often political agendas. While some see the potential fundraising as a quick-fix cure for the current woes in the European economy, he said, others are mooting the tax as a longer term replacement for aid to support the developing world.
“The moves towards this tax paint an increasingly grim picture for any potential for growth in the region. The prospect of Europe-wide implementation would act as a downgrade for the continent’s competitiveness, suffocating Europe of much needed inward investment from those multinationals that have built up significant cash piles during the last few years of recession. What is clear is that a blanket international tax on financial transactions will undoubtedly hit certain countries and regions harder than others, particularly threatening financial centres such as Frankfurt and London and pushing business to markets outside of the EU,” he said.
He added: “Indeed, the European Commission’s study, conducted last year, showed that whilst a tax on shares and derivatives could generate €55bn per year, it could also sap a massive €200bn in growth, on top of the negative employment implications.”