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Return to Article | Print this Page EU puts Tobin tax on agenda By Peter Norman in Brussels - Jul 09 2001 00:00:00
Belgium has put a controversial tax on foreign exchange transactions on
the discussion agenda for its current six-month presidency of the European
Union, to the delight of anti-poverty campaigners and the concern of
European bankers. Following pressure from the Socialist and Green parties in the ruling
Belgian coalition, Didier Reynders, the finance minister, has agreed that
he and his EU colleagues should discuss the so-called "Tobin tax" on
currency speculation at their informal September 22-23 "Ecofin" meeting in
Liége. The Liége meeting precedes the annual meetings of the International
Monetary Fund and World Bank in Washington, fuelling hopes among Tobin tax
supporters that Belgium might rally EU support for the measure to be
included in discussions on reforming the "architecture" of the
international financial system. Non-governmental organisations such as War
on Want believe the Tobin tax could fund a massive rise in financial
support for the world's poor. But according to Mr Reynders' aides, the minister, who is a francophone
liberal, is not enthusiastic about the tax. Nor is Guy Verhofstadt,
Belgium's prime minister, and a liberal from the Flemish part of the
country. "We said we were prepared to talk about it," was the prime
minister's grudging comment last week. James Tobin, a Nobel prize-winning American economist, first proposed a
global tax on short-term foreign exchange market transactions in the 1970s
to calm the massive instability of global currency markets after the
collapse of the post-war Bretton Woods fixed exchange rate regime. Over
the years, his plan has been adopted by anti-poverty groups who argue a
small levy on currency transactions could swell funds available for third
world development. War on Want claims a 0.25 per cent tax on currency transactions would
raise more than $250bn a year - more than five times current aid to poor
countries. But the Banking Federation of the EU, in a recent critical report,
argued the tax would damage trade, penalise investment and be impossible
to apply because it would require support from all countries. "At present nothing can lead us to expect that a consensus could be
reached either within the OECD or the Group of Seven, or even at the level
of the EU, for a tax on foreign exchange transactions," it said. Nonetheless, EU finance ministers will still discuss the tax after the
summer break, if only because of the internal complexities of Belgium's
"rainbow" coalition of liberal, socialist and green parties. | |
© Copyright The Financial Times Limited 2001. | |
