Europe will revive the 'Tobin tax'

Subject

Outlook for the introduction of a financial transactions tax.

Significance

Ten euro-area countries, led by Austria and France, have kickstarted plans to revive a 'Tobin tax' proposal, which will introduce a financial transactions tax (FTT) in two stages, the first by January 1, 2016 and the second a year later. Although FTT opponents, led by the United Kingdom, sank any EU-wide measure, the smaller group is now determined to go it alone with a measure that would apply only within these countries and to a broad range of transactions, including derivatives, at low rates.

Impacts

• The European Commission will assist in addressing necessary technical issues.
• An FTT on a wide range of derivatives raises implementation challenges that cannot be solved according to the proposed timetable.
• The United Kingdom may subject any agreed FTT to further legal challenge before the European Court of Justice (ECJ).