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Tax on transactions worrying European finance industry
While the Australian financial services industry goes through its own regulatory upheaval, European financial services companies are opposing the implementation of a tax on financial transactions to fund the region’s debt.
The level of resistance to the so-called ‘Tobin tax’ has been made clear by the EDHEC-Risk Institute, a European centre for financial research, which has warned that the tax will result in a reduction in the trading of securities.
“The Tobin tax reduces speculative activity in financial markets, but this tax also drives away investors who provide liquidity, stabilise prices, and help in the price discovery process,” it said.
The EDHEC-Risk Institute analysis also warned that imposing a tax on financial transactions would present its own challenges, not least of which being the ability of regulators to distinguish between transactions related to fundamental business and those that are purely speculative.
“From the point of view of speculators, unless every country in the world introduced the Tobin tax, it would be easy to circumvent the tax by routing transactions through countries that do not impose the tax,” it said.
AUTHOR
Mike Taylor
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