Did David Cameron See The Writing On The Wall When He Walked From The New EU Treaty

In 2010, the Euro-zone executive board said it would study whether the WU should go alone in imposing a tax on financial transactions after G20 leaders failed to agree on the issue. In September 2010, then president of the European Commission Jose Barroso officially presented the plan of creating the new financial transactions tax.

The Global Financial Markets Association issued a statement saying that the proposed European financial transaction tax (FTT) will hike the cost of trading foreign exchange by up to 18 times, in the latest attack on the controversial tax reform.

If implemented the tax must be paid in the European country where the financial operator is established, meaning that the EU-FTT would cover all transactions that involve a single European firm, no matter if these transactions are carried out in the EU or elsewhere in the world. This would cause a huge hardship on competitiveness of EU financial firms, competing outside of the EU.

The Global Financial Markets Association the largest trade association in Europe, North America and Asia representing financial (forex) transactions, issued a report this week, which said the tax would make all forex trades up to seven times more expensive, and more liquid products up to 18 times more costly.

This study shows that the proposed tax would in effect penalize Europe’s businesses for sensible risk management and also threaten to impose further costs on the investment returns of pension funds and asset managers. Additional cost related to the trading tax will be passed on to end-users, such as pension funds, insurers and corporate, and would have a negative effect on the real economy as well as global competition.

The GFMA report said that up to three-quarters of tax eligible currency transactions could be moved outside the EU’s tax jurisdiction if the FTT is imposed. This tax would validate UK Prime Minister David Cameron’s response to the new EU treaty. If imposed England would have huge competitive edge to offer financial firms.

The German banking association stated earlier this week that the FTT could reduce bank earnings by as much as 10 percent contrary to German Chancellor Merkel who insisted last week that she wants European finance ministers to complete plans by March. EU Ministers will undoubtedly use these funds as a promise to repay loans and bonds issued for bailouts and to fund the new Emergency Stability Fund.

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