The Tobin tax, which is a tax on financial transactions, will go into effect in 2015 in Spain and ten other EU nations. This is the agreement that was reached yesterday in an Ecofin meeting after years of talks about whether the tax would be suitable or appropriate.
We should remember that besides suppressing tax havens, the Tobin tax was one of the first measures that officials considered when the crisis began. They have given up fighting tax havens. But Europe is embracing the Tobin tax, because its main strategy to combat the crisis is to enforce austerity and raise taxes. The new tax shows that leaders are running low on ideas and, as usual, they are raising taxes and trying to justify this move by saying that the rich are carrying the most weight. This is demagoguery. The 0.1% tax on financial transactions (in Spain it will only apply to stock trades) could increase costs by 25%-50% for investments between 1,000 and 10,000 euros. In other words, the seemingly small tax could make it harder for small investors, who are not able to redirect their savings to places where the tax does not exist as big companies can do.
Ultimately, the new tax could have a negative impact on investment from foreign sources, which has increased steadily as the globe becomes more interested in Europe. The effects of the Tobin tax could be a disappointment, and its negative impact on foreign investment and the economic recovery are unlikely to balance the slight tax revenues that the government expects to collect.
