The Financial transaction tax (FTT) is a tax levied on all financial product transactions – including derivatives such as Credit Default Swaps (CDS) – which is proportionate to the value of the product. Every time a financial product is bought or sold, a very small proportion of its price (0.05%) is collected – half of it accrue to the buyer, the other half to the seller.
The FTT raises huge revenue
According to reference research on the topic, we can expect more than €500 billion in tax revenue from a global FTT of 0.05%, including €200bn in Europe alone.
The FTT tackles speculation and provides financial stability
The FTT makes speculation more expensive. In particular, hedge funds rely on very small price variations, huge volume of money and a great number of transactions to generate high returns. A 0.05% FTT could deter many socially useless transactions from taking place. Ultimately, the FTT will result in changing the business of hedge funds and other speculators.
There is many example of FTT being currently levied all around: in Taiwan, Korea, the UK to name a few. Historically, many more countries had significant FTTs, even the USA, but they were abandoned over the last 20 years following generalised de-regulation of the financial markets.
Technical progress made it even easier and cheaper to collect a FTT: as most transactions, even on the over-the-counter markets, are carried through electronically, the FTT is just about an extra line of computer code. Transaction and brokerage fees are already levied this way.
In the UK, the stamp-duty – which is a FTT on stock transactions – generated €5bn in 2007. It is a hundred times cheaper to collect than an equivalent amount of income tax.
The PES is working at European level with Europeans For Financial Reform (EFFR) to establish a FTT. EFFR is a coalition of progressive forces, ranging from NGOs to Trade Unions, citizens, academics and progressive politicians, that have come together to spearhead a campaign for real reform in our banking and financial system.
24 April 2010 - PES Action Day for a Financial Transaction Tax
Documents
- Article by PES President Poul Nyrup Rasmussen
- The contribution by FEPS to the IMF consultation on the “fair burden sharing”
- Background paper on the FTT - Europeans For Financial Reform
- Leaflet in English, French and German