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June 21, 2013 / politicsbitesize

Robin Hood Tax is back – almost!

Robin Hood TaxOn Tuesday 18th June a Commons vote on the issue of the Financial Transaction Tax (FTT) saw the Liberal Democrats put under pressure to break with their coalition partners and support the so-called Robin Hood Tax. The Labour Party pressed for a vote to force the government into supporting the principle.  Unfortunately MPs rejected the amendment urging the UK to work with financial institutions and the EU to find a consensus on the FTT by 96 votes.

In a carefully worded amendment, Chris Leslie, the shadow Treasury minister, called on ‘the government to support the principle of an FTT and to work with other global financial centres, including the US, to reach consensus on a “modest rate without creating negative economic consequences”’.  The amendment was also intended to embarrass the government by highlighting George Osborne’s move to challenge the European Commission over the design of the tax.

Back in April the Chancellor announced that he was taking a case to the European Court of Justice (ECJ) because he believes that the tax could be damaging to the already weak Eurozone.  He is also concerned about the scope of the tax and that the plan will affect banks and institutions in countries outside the scheme.  During a visit to Washington he said, ‘I am not against financial transaction taxes in principle, but I am concerned about the extra-territorial aspects of the European commission’s proposals.’  It is understood that it could take up to two years for the ECJ to consider the case.

In the meantime, pressure is being applied by Labour to find support for the transaction tax so that negotiations can get underway with financial institutions in order to find a consensus that might get the United States on board.  So far 11 EU member states – Germany, France, Spain, Italy, Belgium, Portugal, Greece, Austria, Slovakia, Slovenia and Estonia – have formed a ‘coalition of the willing’ in support of the levy.  But this backing is beginning to wane.

An article in The Guardian by Philippe Lamberts indicates that there is loss of momentum for this scheme thanks to ’governments with close relationships to the financial lobbies’.  He suggests that the financial industry is aggressively lobbying the European parliament for exemptions that would undermine the impact of the Robin Hood Tax.  This assault on the FTT is spreading fear and doubt within governments who have already agreed to support the measure.  Lamberts reports that, ‘among the 11 European states that decided to implement this tax in January 2013, Germany has now put its plans on ice until after the election; Belgium and Austria are seeking to exclude pension funds from its scope; and France and Italy are pushing for their own, lighter version, thereby transforming a simple tax into a complex and costly one’.

It is important that this issue is reignited in the consciousness of the general public and governments because economies such as the UK and the US need alternative revenues.  The pressure cannot always be placed on the taxpayer to fund the public services that they use.  As Chris Leslie stated in the Commons on Tuesday, ‘there are many lessons from the banking crisis, the most obvious of which is that the sheer globalised might of financial trading can overpower the plans and defences of individual nation states. Governments shouldn’t just shrug and accept this fate – which is why George Osborne should champion a reform agenda to harness international financial markets so that they serve our societies and economies’.

 

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