Big news! -- Passage of the "Tobin Tax" by the European Union
EU finance ministers cleared the way for 11 members to
introduce a trading tax. This tax can raise billions in
euros from the financial services industry and deter
speculation, particularly the high-frequency trading type.
The U.K., Europe's leading financial center, decided not to
adopt the new levy and abstained, along with bank center
Luxembourg, the Czech Republic and Malta. Further, U.K.
PM David Cameron now seeks to introduce a referendum on staying
in the EU.
John Keynes once said,
"The ideas of economists and political philosophers, both
when they are right and when they are wrong, are more
powerful than is commonly understood. Indeed the world is
ruled by little else. Practical men, who believe themselves
to be quite exempt from any intellectual influence, are
usually the slaves of some defunct economist."
The defunct economist this time around?
Yale Professor and Nobel Laureate James Tobin, who died in
According to the NY Times, proposed legislation would impose
a tax of 0.1% on the value of all stock and bond trades, and of
0.01% on all derivatives trades. That could raise €57 billion
($74B) annually, or about 0.5% of EU output, if it
applied across the bloc.
Fewer than half expect to participate. Without revenue
from the U.K., the amount should be significantly less.
Trading taxes more likely collect €37 billion.
Tobin Taxes will drive investors away and slow Europe's GDP
growth. It risks opening divisions in the EU just as the euro
zone looks to cooperate more closely on fiscal, money, and bank
policy to build stronger foundations for the euro.
What do you think? Is this tax a good idea whose time
has finally come? Or a bad idea at a bad time for the EU?
ISHARS-MS EU FN (EUFN): ETF Research Reports
ISHARS-UNITED K (EWU): ETF Research Reports
To read this article on Zacks.com click here.