Brussels, 08/11/2012 (Agence Europe) - The financial transactions tax (FTT) that 11 member states are planning to introduce by means of enhanced cooperation (see EUROPE 10711) “is a dangerous move that might harm Europe's economies rather than help to boost their competitiveness,” says a “euro-realist” foundation, New Directions (allied to the British Conservatives), in a study presented with Swedish free market thinktank Captus in Brussels on Wednesday 7 November.
The study argues that “financial transactions are highly mobile, so even low levels of taxes will force out trade to other nations. In addition, it is quite probable that market volatility will increase, rather than decrease, due to such taxes,” which is not what the European Commission claims in its draft FTT legislation (see EUROPE 10716). To back up its argument against a FTT in Europe, or for that matter a tax on aviation or carbon emissions, the research points out that 14 member states “already have tax rates that are close to the top of the Laffer curve, the point after which higher taxes reduce economic output so much that even tax revenues are reduced. (…) When a transaction tax on stock trading was imposed in Sweden in 1984, the result was that much of the trade migrated to New York and London.” The study explains that when aviation taxes were introduced in the Netherlands and Denmark, “they had adverse effects on the two countries' economies.” The study can be found at: (http://newdirectionfoundation.org/EUdirecttax.pdf ). (FG/transl.fl)