Support for a European financial transaction tax (FTT) is growing with heavy-weights France and Germany both lobbying for its introduction, but the Danish government is not so convinced.
The European Commission has proposed the FTT – sometimes called a Tobin tax – to raise capital for governments and discourage risky speculative behavior. But according to its own report from September, the commission predicted that Europe may experience a drop in GDP once it was implemented.
“The commission’s own calculations show that a tax on financial transactions is a relatively expensive option,” the economy minister, Margrethe Vestager, said according to Politiken newspaper. “In other words the commission is saying there are cheaper and more effective ways to raise the same income regardless of how the money raised will be spent.”
Vestager gave the same message to parliament, adding that 440,000 jobs in Europe, 5,000 in Denmark, could be lost if the FTT is implemented.
The commission has suggested a tax rate of between 0.1% and 0.01% placed on transactions of financial instruments such as securities, bonds and derivatives, but not on bonds issued by governments or on transactions by individuals such as mortgage payments.
“The public sector and thus the tax payer supported the financial sector through the financial crisis,” the commission writes in its proposal. “The financial sector should now bear its fair share for the costs through a tax on financial transactions.”
But while the FTT could raise as much as €60 billion, the commission admitted that it could lead to small contractions in European economies.
While Vestager referred to the commissionÂ’s own findings, she was quickly attacked for not giving a balanced view of the the report.
“Those who use the commission’s numbers to show hundreds of thousands of lost work places have not understood our analysis and proposal properly,” European Commission tax spokesperson Emer Traynor said. “If the revenues are intelligently recycled into the economy, then there would be no negative impact on growth and jobs at all, even in the long term.”
Former PM Poul Nyrup Rasmussen was also critical of Vestager, telling political news website Altinget.dk that she misrepresented the commissionÂ’s findings.
“There’s no point in plucking out a single page,” Rasmussen said. “If you read the report in its entirety you can see that some of the minister’s arguments are wrong compared to what the commission concludes.”
Vestager defended herself, however.
“The commissionÂ’s numbers are the commission’s numbers and itÂ’s hard to determine what the proposal will mean,” she told Politiken. “But weÂ’re in no doubt that it will have an effect and that the Tobin tax will, as the commission says, mean a loss of growth.”
