The decision by 11 European Union countries to levy a financial transaction tax starting in 2016 continues to draw fire from the financial industry.
PricewaterhouseCoopers recently issued a report saying the FTT proposed by the EU in May could reduce the region’s GDP growth by 0.3 percent to 2.4 percent.
The PwC report was commissioned by 27 financial trade groups. Apart from the estimate of GDP growth effects, the report says the tax does nothing to reduce the main source of systemic risk – the interconnectivity of financial services firms.
Backers of the tax first proposed it in 2011 as a way to reduce speculative trading, rein in systemic risk and force the institutions that caused the financial crisis to shoulder some of its costs. However, opponents of the FTT, a version of the so-called Tobin Tax, say it would make the markets less efficient and drive up costs for all investors – including retail investors and their retirement vehicles.
So far, the EU countries planning to implement the tax are France, Germany, Estonia, Spain, Portugal, Italy, Greece, Austria, Belgium, Slovenia and Slovakia. England – the region’s financial powerhouse – has so far refused to do so.