Bank tax is dead in the European Union

The proposed bank tax on transactions is a nonstarter because it would violate European Union rules.

Katie Collins/PA Wire/AP/File
Britain's Conservative Party leader David Cameron (right) said last month that he would impose a new tax on banks to avoid taxpayers bearing the cost of any future bailouts. But the bank tax is dead. European Union rules forbid it.

Rootling around, as one does, the EU servers I found this lovely document which tells us that the Robin Hood Tax is dead. Dodo'ed. A Norwegian parrot.

The whole thing is about "innovative financing" which is the modern phrase meaning "finding new things to tax". It's also a document written by the bureaucracy, not the politicians, which might explain why it seems to track reality quite well. There's about ten pages (starting at page 20) discussing a financial transactions tax and they do cover all of the correct points. But the most important point that they make is a real cracker.

A financial transactions tax, something like the Robin Hood Tax, would be illegal. Indeed, we've known since the 1970s, when James Tobin first suggested such a tax on currency transactions, that such a tax would be illegal in the EU:

At least for a levy on currency transactions some legal aspects have to be considered. In relation to the original proposal by Tobin for a currency transactions tax legal obstacles were put forward by the ECB on its compatibility with the free movement of capital and payments between Member States and between Member States and third countries under Article 63 of the Treaty on the Functioning of the European Union (TFEU) (ex Article 56 of the Treaty Establishing the European Community (TEC)).45 Since the mechanism of a currency transactions levy is supposed to be based on taxing the net position of foreign exchange transactions, it could represent a restriction of the free movement of capital and payments (Article 63 TFEU). Besides the effect on the netting operation itself, it indirectly restricts underlying transactions, including those between Member States and with third countries, by rendering them more costly. It is unlikely that, for this restriction, a justification sufficient for the purposes of the Treaty could be found. Even if e.g. raising funds to benefit stability funding were to be considered as an overriding requirement of general interest, that requirement could not explain why transactions involving countries with different currencies would be treated less favourably than those involving only one currency. Furthermore, the tax is considered to be disproportionate as funds could alternatively be raised by other means of budget attribution without affecting a basic freedom of the Treaty and, in any event, because the scope of the tax would be unrelated to the risks to be covered by the tax revenue raised. Even a very low tax rate would constitute an infringement, and it would not be possible to establish a threshold of insignificance.

There's no way around this point at all. The Robin Hood Tax simply cannot be implemented within the European Union.

It was a silly idea to begin with but given that having the tax is simply impossible might I suggest that these people go and do something more useful? And perhaps the organisers might want to have a little word with their professional advisers as to why they didn't point this out before. You know, before they started mobilising the fan base for no good reason?

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