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EU warns against German financial transaction tax

The Local · 31 Aug 2010, 08:45

Published: 31 Aug 2010 08:45 GMT+02:00

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Business daily Handelsblatt reported Tuesday that an unpublished assessment by EU tax commissioner Algirdas Semeta warned that such a tax could have “considerable unwanted effects” such as driving up the financing costs for businesses and governments.

The tax could also intensify fluctuations on stock markets, the report warned. Furthermore, the tax would not apply to all securities and financial instruments equally – rather, the more common a security, the more strongly would it be taxed, Semeta said.

“For example, shares of bigger companies with many shareholders would bear a bigger tax burden,” Semeta said.

Also, there was no guarantee that the tax would only affect wealthy investors and speculators. Rather it would have to apply also to pension funds and life insurance funds, for example.

Chancellor Angela Merkel has backed such a plan, as has Germany’s neighbour France.

Story continues below…

A financial transaction tax was part of the government’s raft of tough budget measures announced it June. At the time, Merkel said the chances that neighbours would agree to a European-wide levy were "not bad."

The Local (news@thelocal.de)

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Your comments about this article

09:44 August 31, 2010 by Clapoti
The German government will invent a tax for everything instead of finding a solution to the real problem. They need to figure out where they are wasting money or how to get the unemployment rate down to get more income without taxing more everyone.

It's not possible that other countries with a tax burden lower than Germany can balance a budget (or at least have less deficit) but that here it seems impossible.
11:23 August 31, 2010 by Foreign interest.
Mr Semeta's wisdom should not be underestimated. The tax proposed by less-intellectually endowed has been thoroughly discredited by treasury officials in all developed countries. Those who continue to push for an iniquitous tax that would result in severe repercussions via negative trickle down effects on capital investment, pensions and support industry employment, are fooling themselves. Even the IMF has warned against this tax. At best it would be net revenue neutral, at worst its impacts would be wide-ranging and economically destructive.

Be grateful that Mr Semeta is warning against an absurd and damaging idea.
13:17 August 31, 2010 by germinator
the IMF coming out against it is reason enough to support it.
14:58 August 31, 2010 by Portnoy
Oh what a load of pap you spew foreign interest. You don't even seem to understand what this tax would be about. It wouldn't affect "capital investment" at all since it would only apply to trades and no one has believed in trickle-down economics since the '80s. Wild speculation is too much of a problem in the markets and no regulation can reel it in but tapping into investors' greed bone can -- wanna make a huge bet on corndog futures? Fine, pay 0.1% of that bet in taxes so that you stop and make sure it's a bet you want.
19:34 August 31, 2010 by frankiep
It appeared for a while that Germany wasn't going to go down the same road that has all but destroyed the US economy by placing a tax on everything that moves. Luckily the EU is speaking out against such a stupid idea. Even a first year economics students learn two things within the first couple weeks of classes:

1) Taxing investment DISCOURAGES investment

2) Corporations, no matter what the stated tax rate is, DO NOT pay taxes. They pass them on to the public.

It's amazing how many people cannot see past their emotions of wanting to "stick it to the eeeevil rich people" and support counterproductive policies like this.
13:00 September 1, 2010 by germinator
there are very few details published here, so it's hard to know what the exact plan is/was, but taxing investment TRANSACTIONS discourages CHURNING, MARKET MANIPULATION, SPECULATION, DAY TRADING and otherwise using the market like a casino, as opposed to a system of longer term investment.

Taxes have to come from somewhere. Better from here than raising the VAT.
20:34 September 1, 2010 by frankiep
come on now. Anyone in a position to to manipulate the market as you suggest would do so in an effort to affect the market in such a way that paying this tax will mean little, if anything, to them. Market manipulation is already illegal, so how about putting more resources into oversight measures to prevent it rather than implementing some sort of arbitrary tax that will cause more harm than good.
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