Why is Malta opposing a Tobin tax?

Source: Mr. G M Mangion¸ PKF Malta

As published in the MaltaToday on Wednesday the 12th of June 2013


This article will delve on the merits of the introduction of a financial transaction tax – aka Tobin Tax. Malta¸ along with Ireland¸ UK and Netherlands strongly opposed this idea and in this article one can read the pros and cons of such a fiscal tool which some are saying is needed for the European Commission to meet its stretched obligations for the next budget. To give some background over the last thirty years business leaders have debated the case for introducing a levy on financial transactions¸ following a proposal by the American economist James Tobin that a tax on currency trades could dissuade harmful speculation by financial markets. Thus it was in late September 2011¸ the Commission launched a proposal for the introduction of a financial transaction tax (FTT) in the European Union.

This tax would be levied on the purchase and sale of nearly all securities¸ including shares¸ debt securities and derivatives. The rate on shares and debt securities would be 0.1% and on derivatives 0.01%. With the FTT¸ the Commission aims to discourage risky trading (including speculation) and to make the financial sector (particularly banks) pay for part of the damage caused by the growth crisis. Many economists agree that any trade off between its favourable monetary effects and the adverse impact on the economy can only be balanced if the tax is introduced on a global scale. This is of course utopian. As most of the Eurozone members are going through a period of financial turbulence¸ it is next to impossible to reach a universal consensus for its introduction.

Knowing that an across the board acceptance is unlikely the argument arises that a tax that is introduced unilaterally in 11 of the members states of the European Union may be easily evaded by moving business operations out to other countries. Thus the FTT may potentially act as a barrier for foreign parties to establish themselves or do business and its negative effects would be further reinforced if the tax were introduced in only part of the EU¸ such as is happening now.

So let us see who the proponents of such a tax are – to start with the Commission feels that about €60 billion can be collected annually and such extra revenues will come handy when drafting its next seven year budget. Likewise we see how France is keen on pursuing a tax within the eurozone and in the past was very bullish to even go it alone and impose 0.1 percent levy on financial transactions. Equally in favour was Germany. Germany’s Chancellor Angela Merkel Saturday found backing from her party to introduce such a tax within the euro zone even if in practice it is impossible to launch it in the European Union as a whole. This is of course only a compromise solution since Britain was vociferous in its opposition and vows to block this tax. Lawmaker Michael Fuchs of Merkel’s CDU said at the party conference that introducing such a tax only on continental Europe and not in the U.K. would be wrong because this could be a boosting program for the City of London.

Quoting Fuchs¸ he said: “The Englishmen must display European solidarity because otherwise they would get into a splendid isolation¸ which they should prevent.” But not all northern countries are in favour and we note how Netherlands wishes to protect its budding financial services indu