What is the FTT’s purpose?
Following the 2008 financial crash the EU proposed a Financial Transaction Tax (FTT) also known as the Tobin tax as a means of reducing excessive risk taking by banks and other financial institutions and restricting income levels within the financial sector. It was argued that it would also help to increase stability and cushion domestic economies from excessive currency speculation.
Arguably it is intended to regulate both risky financial behaviour and, by introducing greater harmonisation of tax within the EU, to create an economically level playing field among members.
However, the idea has been opposed by the City of London on the grounds that it would result in job losses in financial centres, a decline in the level and flow of foreign direct investment and ultimately would slow global economic growth and development.
The arguments against
Further discussion about the introduction of a proposed EU (FTT) has been delayed until mid 2016 and so far only 10 countries within the EU are supporting some form of FTT.
All 28 EU member countries must vote in favour of the FTT for it to be introduced and indeed such a tax would be unlikely to achieve its stated aims within the EU while there was still the opportunity to carry out transactions outside of those countries that had adopted it.
The City also argues that harmonising tax across the EU would limit its powers to attract the best talent to London.
The question is whether it is in fact the case that light touch regulation in the UK and the arguably high level of expertise among corporate financial advisers that makes London the perfect place to do business.
If so, were the UK to leave the EU, would the financial centre of power shift away from London or is the concentration of financial expertise that exists there enough to avoid this?
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