Financial Transaction Tax is threatened with being further watered down

Finance Ministers want additional exemptions

One can assume that some of the Finance Ministers of the 10 countries, which are taking part in the negotiations, have requested extensive exemptions during the latest round of discussions concerning the Financial Transaction Tax (FTT). At least this is the way the German Finance Minister Wolfgang Schäuble, who uses the example of a Swiss cheese, which was slowly developing too many holes, describes it. Too many exemptions would mean that the FTT would be reduced to almost nothing.

Intensive lobbying by the financial sector

And indeed, the finance industry has for years been lobbying against the mini tax of 0.1 % for shares and bonds and 0.01 % for derivatives. Obvious interventions come in particular from pension funds, which fan fears that by introducing such a tax, (future) pensioners might suffer significant pension losses. However, the financial sector fails to tell the true reason: financial speculations with funds, which banks, insurance companies and other financial institutions stash away in their accounts, would then be far less attractive than they have been so far.

Positive effects through a Financial Transaction Tax

Which effects would the introduction of a FTT have? It would make speculations on financial markets significantly less attractive. In turn, a return by the financial sector towards its actual responsibilities, namely financing investments in the real economy, would become more attractive. Apart from that, the revenue generated could be used for public purposes such as education and training, healthcare, infrastructure or development policy.

What happens now?

The key focus is now on talks how pension funds should be dealt with. Perhaps the negotiations result in exempting these funds from taxation, which, however, would weaken the aims of the Financial Transaction Tax. It is still open when at last an agreement on the FTT will be reached.