The French Finance Minister - Francois Baroin - announced that Austria, Belgium, Finland, France, Germany, Greece, Italy, Portugal and Spain have all agreed to introduce a financial transaction tax. It is an impressive list, but there are at least three notable exceptions: Ireland, Luxembourg and the UK.
Lets not dwell on the vexed question whether a financial transaction tax is a good idea. Lets focus on the implications of introducing the tax within the EU when a significant minority of members decide that they don't want it.
The obvious implication is that it will be much cheaper to conduct financial transactions in the dissenting three countries. It is extremely likely that the EU financial system will relocate to London, Dublin and Luxembourg.
So why are the major eurozone countries implementing a tax that can only weaken their domestic financial systems?
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It has also been reported that plans for enforcing the transaction tax include "requirement that clearing-houses handling euro-denominated derivatives are based in a euro country"
which merely goes to prove that the politicians in question do not understand what derivatives are
so why do we think they understand how markets work ?
It's the old lunatics-asylum cliche.
Most of the taxable transactions in the EU already take place (or are booked) in London, Dublin and Luxembourg. The implementers are therefore 'looking good' at very low cost to themselves. With a bit of luck, they think they can bamboozle the dissenters into falling into line and ruining their own financial services businesses.
They're mad, that's all.
These people are complete fools, but they are clever ones, they must have a plan.
Suggestion: Because they think they can levy the tax, or a penal duty like a border tax, on the movement (real or notional) of Euros entering and leaving the eurozone or european registered banks to or from outside the eurozone. That will have the effect of double taxing any euro transactions that takes place in London, or elsewhere, rather tan Paris. Unless the euros are never repatriated, and why would most people bother if they didn't need them?
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