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22nd May 2022

Trichet puts dampener on financial transaction tax

  • Jean-Claude Trichet says any financial tax must be implemented on a global scale (Photo: Swedish Presidency)

European Central Bank President Jean-Claude Trichet has said a financial transaction tax could only work if implemented across the globe, marking a setback for others who have argued that Europe could go it alone.

Speaking after an informal meeting of EU finance ministers discussed the issue in Brussels on Friday (1 October), Mr Trichet said anything short of a complete worldwide roll-out would result in transactions simply being carried out in different jurisdictions.

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"The financial transaction taxation presents a number of disadvantages economically, financially, in terms of technical implementation and there is of course an element, which is extremely important: It has to be implemented, if decided, absolutely everywhere in the world," said the respected French banker.

"Otherwise it only translates in displacing transactions out of those who introduce this, so I insist on that," he added.

The remarks will come as a disappointment to others who say Europe should not be held captive by the reluctance of other countries to move forward with the idea, most noticeably the United States.

Belgian finance minister Didier Reynders, whose country currently holds the EU's six-month rotating presidency, recently raised the possibility of a eurozone-only financial transaction tax, saying the 16-country bloc should push ahead if a deal amongst the full EU-27 proved impossible.

Supporters say even a minuscule tax on each financial transaction could help raise billions of euros for the fight against poverty and climate change, amongst other recipients.

The Green group in the European Parliament recently produced a paper on the subject, saying a tax rate of just 0.05 percent could generate up to €190 billion per year if introduced at the EU level, or up to €98 billion if restricted just to the eurozone. The parliament's Socialist and hard left groups also support the initiative.

Speaking after the finance minister meeting, Mr Reynders said he would continue to push for the tax in the G20 forum.

French President Nicolas Sarkozy recently won plaudits from the NGO community when he called for the world to introduce the tax at a UN summit in New York, with France and Germany the leading advocates for the measure within the EU.

Britain is at the forefront of opposition within the bloc, citing concerns akin to those expressed by Mr Trichet on Friday. Sweden - which introduced a similar tax in the 1980s before later scrapping it - is also opposed.

The concept was originally dreamed up by US Nobel Laureate economist James Tobin in the early 1970s, and was initially devised as a tax on currency trading as a means of reducing volatility.

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