Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in
In the same category

EU Financial Tax Portends Loss of Market Leadership

IMG Auteur
Published : January 30th, 2013
882 words - Reading time : 2 - 3 minutes
( 1 vote, 5/5 ) , 1 commentary
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
1
comment
Our Newsletter...
Category : Editorials



Although it was barely noticed by the American press, on January 22nd, EU finance ministers approved a new "Financial Transactions Tax" (FTT) that has implications for market competitiveness around the world. 

The move was conceived as a Franco-German initiative and was supported by seven other EU nations, including the entire bloc of highly indebted southern tier nations, to reach the minimum nine nations required to press ahead under the EU's so-called, 'enhanced co-operation procedures'. If at least one of the transacting parties involved is an EU resident, the tax will impose a one tenth of one percent tax (on both sides of a financial transaction) on secondary market trades in equities, bonds, securities and REPOS. Derivatives will be taxed at a lower one hundredth percent. 

Although limited presently in scope and at an apparently low rate, the tax will nevertheless provide an extra layer of financial bureaucracy that will dissuade some market participants from transacting in the Eurozone. It should be patently obvious that transactional fluidity is supportive of efficient markets and ultimately of economic growth. It is only in the poisonous, anti-capitalist, post-crisis environment that such a measure could be passed. More importantly, the measure is a "supra national" tax that helps to pave the way towards a global taxation system. Not only will such a system be economically damaging, but it will be devoid largely of effective democratic accountability. 

In its March 2011 tax meeting in Brussels, the EU had originally proposed a "Financial Activities Tax" (FAT), a more comprehensive, and potentially more destructive, EU-wide measure. The opposition to the tax was so fierce, most notably from Great Britain, that the FTT was proposed as a compromise. 

Ignoring the role of the central banks in the financial debacle, the German Finance Minister commented lamely that, "The financial sector must appropriately participate in bearing the cost of the financial crisis." According to the EU's Tax Commissioner, Algridas Semeta, the FTT decision was a "major achievement for EU tax policies." Those who believe, as I do, that the EU's covert intent is to erode the traditional independence of the world's financial markets, particularly the dominance of London and New York, certainly share those sentiments. 

In an economic impact analysis running to over 1,000 pages, the EU Commission estimated that the FTT would raise $76 billion annually. The commission admitted that this would cause a 10 percent drop in securities transactions, a 70 percent fall in derivatives trading and result in a loss to the EU's GDP of some 0.53 percent. All this in an EU economy struggling now to prevent a recession falling into a depression! Of course, the Commission failed to consider any resulting lost tax revenues implied by a fall in GDP.

On its face, it was clear that the idea for both the FAT and the FTT was a product of left wing ideology of soaking the so-called rich, but devoid of any real understanding of how free markets operate.

If such a tax were imposed in single country market, in the UK for instance, it would encourage a massive flow of business to other national markets. The EU must feel that its size and status will protect it from such an eventuality. Few suspect that the FTT will offer economic benefits that would outweigh the harm it will impose. But that is not the criteria by which the measure will be judged by EU leadership. What if FTT is designed not as a tax to encourage more responsible investing,  but as a covert weapon to win political control of Europe? 

FTT is a supra national tax imposed on top, and independent of, national financial taxes. Once the infrastructure to enforce and collect the tax is established, the tax rates can be raised relatively easily. Most importantly, once such supra national taxes are established, they suffer from very little if any democratic supervision. 

EU Tax Commissioner, Algirdas Semeta, has said that the Commission has arrived at a means of levying a tax that prevents investors from relocating. The tax will be imposed on both the buyer and the seller of a financial instrument so long as either of the two parties is based within any participating EU country. This means that even investors in London or New York accustomed to paying only their domestic taxes may not escape the new tax completely. 

At a time when governments should be encouraging the free flow of capital, this measure moves us exactly in the wrong direction. Combined with the heightened regulatory scrutiny in the United States (President Obama's appointment last week of the first former federal prosecutor to head the Securities and Exchange Commission), the move bolsters the belief that the West will likely cede financial market leadership to the freer and more vibrant markets in the Pacific. 

John Browne is a Senior Economic Consultant to Euro Pacific Capital. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific Capital, or its CEO, Peter Schiff.

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, John Browne, and other Euro Pacific commentators delivered to your inbox every Monday! 

Order a copy of Peter Schiff's new book, The Real Crash: America's Coming Bankruptcy - How to Save Yourself and Your Country, and save yourself 35%!
Companies Mentionned : Southern |
<< Previous article
Rate :Average :5 (1 vote)
>> Next article
John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc. Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with." A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard. In addition to careers in British politics and the military, John has a significant background, spanning some 37 years, in finance and business. After graduating from the Harvard Business School, John joined the New York firm of Morgan Stanley & Co as an investment banker. He has also worked with such firms as Barclays Bank and Citigroup. During his career he has served on the boards of numerous banks and international corporations, with a special interest in venture capital. He is a frequent guest on CNBC's Kudlow & Co. and the former editor of NewsMax Media's Financial Intelligence Report and Moneynews.com. He holds FINRA series 7 & 63 licenses.
Latest comment posted for this article
... the German Finance Minister commented lamely that, "The financial sector must appropriately participate in bearing the cost of the financial crisis." ... That is like saying the garbage collector must bear responsibility for the landfill filling up.  Read more
overtheedge - 1/30/2013 at 11:12 PM GMT
Top articles
Latest Comments
Here's What Will Send Oil Prices...
05 Marovertheedge
"Admittedly there has been a production surplus since the beginning of 2014 but that is nothing new and is forecast to be back in balance by the en...
Another Clinton Scandal
05 Marovertheedge
O, Mr Hoye you must have really infuriated the Clintonistas. Before I voted, you only had 1 vote that was a one star. I tend to think ...
Apple's iWatch and Some Crazy Go...
05 Marovertheedge
Oooo, let me think about this. I have forward guidance about gold-bearing Timex® equivalents that are supposedly gonna be made by Apple/Foxconn...
Financial Repression Authority w...
03 Marovertheedge
"The US is only about 50% of global market cap but most US investors have a 'hometown bias" of having 70% of their portfolio in US securities. Fabe...
Bondholders “Bailed In” In Austr...
03 Marovertheedge
"“Bail-in is now the rule” as Irish finance Minister Michael Noonan warned in June 2013. Noonan admitted that the move to not maintain deposits as ...
Bondholders “Bailed In” In Austr...
03 MarArgus
Shortly after the Cyprus test run, Canada's budget document made provision for bail-ins in the event of significant 'systemic risk' to the banking ...
Illinois Pension Plans 39% Funde...
02 Marovertheedge
And it gets even worse. The unfunded pension liability monies aren't invested and never will be. You can't pay pensions out of an unfunded ...
China is about to overthrow Lond...
28 Febneville
This a good slap in the face for the downright crooked bullion banks,traders that have been front running ie algorythm trading etc It had to ta...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
TristarTOG.TO
TORC Oil & Gas Ltd. Announces 2014 Fourth Quarter and Year-End Financial & Operating Results
CA$ 10.17+2.52%Trend Power :
Financials
Altius Min.(Ag-Au-Co)ALS.TO
and Callinan combination to create a diversified mining royalty company leader
CA$ 12.05-4.89%Trend Power :
Corporate news
Tahoe ResourcesTHO.TO
Declares Third Monthly Dividend For 2015
CA$ 16.23+1.37%Trend Power :
Corporate news
Sprott Resources(Ag-Au-Co)SCP.TO
Resource Corp. Announces 2014 Annual Results
CA$ 1.28+2.40%Trend Power :
Corporate news
Vista Gold(Cu-Le-Zn)VGZ.TO
. Announces 2014 Results and Provides Update on Recent Activities
CA$ 0.47+11.90%Trend Power :
Corporate news
Major DrillingMDI.TO
Announces Third Quarter Results and Declares Dividend
CA$ 6.43-0.16%Trend Power :
Corporate news
UR-Energy(Ur)URE.TO
Releases 2014 Year End Results
CA$ 1.32+14.78%Trend Power :
Financials
Rockwell(Cu-Gems-Ni)RDI.TO
Announces Filing of Preliminary Short Form Prospectus
CA$ 0.22-13.46%Trend Power :
Corporate news
Cardero Res.(Ag-Au-Cu)CDU.TO
Announces Proposed Reverse Takeover of Artha Resources
CA$ 0.03-14.29%Trend Power :
Corporate news
Goldcorp(Cu-Le-Zn)G.TO
declares third monthly dividend payment for 2015
CA$ 25.88+1.69%Trend Power :
Corporate news
Comments closed
  All Favorites Best Rated  
... the German Finance Minister commented lamely that, "The financial sector must appropriately participate in bearing the cost of the financial crisis." ...

That is like saying the garbage collector must bear responsibility for the landfill filling up.

The financial sector just passes the costs on to the consumer. The consumer foots all the bills. So just how does the financial sector bear any actual costs?
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.