Yannakoudakis is leading the opposition to the financial transaction tax. She explains why she’s hell bent on blocking it
I am firmly opposed to an EU Financial Transaction Tax because I believe that it will weaken growth, cost jobs, drive business out of the EU, especially from my constituency of London, and increase the cost of savings and investments. The strange thing is that the European Commission, which proposed the tax in the first place, wholeheartedly agrees with me. Or at least they used to.
In September last year, the European Commission published an impact assessment of the tax which clearly states that the “the collection of these revenues comes at a cost in terms of a decrease in GDP”. The assessment also projects a 1.76 per cent reduction in the long-term (20-year) growth of the EU, equivalent to £185bn across the Union with a £25.58bn cost to the British economy.
When the European Parliament voted for 20 weeks of maternity leave on full pay, I was able to use my position as European Conservatives and Reformists Group co-ordinator in the Women’s Rights committee to instigate an impact assessment. This evaluation revealed the staggering cost of such a proposal; in the UK alone it would amount to an extra £2.5bn.
The results of this assessment were enough to kick the maternity leave proposals into the legislative tall grass, with the Member States of the European Union unwilling to sign up to proposals which they could ill afford.
In spite of the heftier price tag of a “Tobin Tax”, most EU Member States haven’t recoiled at the prospect of the Commission’s negative impact assessment. Indeed, the pious dedication to the tax by France and Germany has led a Damascene conversion by the European Commission and EU tax Commissioner Algirdas Šemeta.
Šemeta was recently in London to tell a House of Lords committee that he believes the FTT would now bring in £8bn. His officials have also announced that they are now revising their impact assessment of the tax, which they say “included a worst-case scenario” for job losses. The Commission now states that it will be carrying out a fine-tuned economic analysis, which reminds me of the kind of “fine tuning” that gave Greece the green light to join the euro.
The European Parliament is no less monomaniacal in its quest for an EU FTT. What ought to be a white elephant is now a great white whale for my fellow euro-deputies and I am beginning to think that there is no problem that MEPs do not think a financial transaction tax can solve. It was with no sense of irony that the European Parliament voted on 2 February – Groundhog Day no less – for another resolution which expressed a “strong belief” in a financial transaction tax.
By my count, this was at least the fourth time the FTT had been tacked onto a resolution or legislative report as some sort of pecuniary panacea to the economic crisis hitting the eurozone.
Why are the European Parliament and Commission hell-bent on this tax? Why do they not relent in the face of opposition to the FTT, not only from the UK, but also Luxembourg and Malta, not least because taxation issues in the EU must be decided on the basis of a unanimous decision by Member States?
When Financial Transaction Tax proposals were first passed by the European Parliament back in March 2011, Martin Schulz, then leader of the Socialist Group, now President of the European Parliament, had this to say: “We want to send out an institutional signal saying that the private sector bears its part of the responsibility for the crisis.” So this is not a tax aimed at generating revenue, but at laying the blame for the economic crisis squarely at the feet of the financial services industry. European Commission President José Manual Barroso called it “A question of fairness”.
My Labour colleagues in the European Parliament agree. They refer to an EU FTT as the “Robin Hood Tax”. The Labour and Liberal Democrat MEPs who slavishly vote for the tax have got it wrong when they think that this will be a symbolic redistribution from rich to poor. Irrespective of whether the banks are blameworthy for the financial crisis, they are unlikely to be penalised by the tax.
Banks can move their businesses to New York or Dubai within days if not hours of an FTT being introduced – Sweden’s failed experiment with a similar tax in 1984 is proof of that.
In fact, it will be Europe’s pensioners and savers who will be hit hardest; insurance premiums will go up. Nobel Laureate Sir James Mirrlees’ cascade effect even suggests that the price of raw materials including food would rise. Job losses in the financial sector would have a spillover effect on related industries.
My colleague Roger Helmer MEP has mischievously dubbed the FTT the “Sherriff of Nottingham Tax”.
I and my fellow Conservatives believe that the tax needs to be introduced in the whole world or not at all. Given that there is little appetite for a global tax, we must fight the European Commission and those MEPs and Member States who support a Tobin Tax.
France has already watered down its proposals for a unilateral FTT by limiting the tax to the purchase of shares of companies quoted on the Paris bourse with a market value of €1bn or more. The proposed French FTT also excludes derivatives which would practically be wiped out by the EU proposal.
Dickens wrote that there is nothing truer than taxes. Yet this is a tax which lies. It lies about its commitment to fairness, it lies about how it can help solve the financial crisis and most importantly it lies about the EU’s commitment to growth and jobs.
Marina Yannakoudakis is a Conservative MEP for London