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A few minutes before the time of writing of this article (the reason I’m writing this article is because of it), I received an email from a Relationship Manager, the name of the person and the firm in which he is connected to I choose to rather omit, informing me of a new development that may affect my portfolio in the near future. Let me show you the content of the email:
Dear valued client,
This is to inform you that a new policy will soon be adopted by 11 members of the Eurozone, to levy a tax for all financial transactions made by entities based in these countries. The countries that adopted the policy are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
The financial transaction tax or FTT, as it will be called, will collect 0.1% of the value of all transactions in all types of financial instruments, excluding derivatives, which will be charged at a rate of 0.01%.
As you are a citizen of one of these countries, it is our duty to inform you that when the tax is implemented, the possibility that the value of your investment managed by us may be affected.
Nonetheless, through the years, our firm has been able to maximise the investments that our valued clients such as you are have placed in our care. In this regard, our management and the full force of our investment team have been working on ways to ensure that we retain that reputation.
We will schedule a meeting with you to personally discuss your options that will both be beneficial to you and to our company. Rest assured that we will do everything that we can to add more value to our clients rather than diminish it.
Yours faithfully,
(SGD) Banker
So there wasn’t really an email sent to me. This is just a make-believe scenario I concocted in my head after I became aware that 11 members of the European Union agreed to put a uniform tax on financial transactions not as much to generate revenue as to make the financial sector accountable and responsible for the wreak it made during the global crisis and the sovereign debt crisis in the Eurozone.
The aforementioned 11 states, adopting a previous proposal debated in 2011, hope that this move will be a benchmark for other members of the EU to follow suit as the tax will target to “disincentivise excessively risky activities by financial institutions” as well as “complement regulatory measures aimed at avoiding future crises”.
However, my fear, as was shown by my imaginary email above, is in fact shared by the British Government and most definitely by some of the brightest experts in the world of finance and international political economy that such a move, when not shared by all, will only be bypassed by those whom the measure is intended with the help of very creative experts in the world of investment.
My belief is not without basis. How else could they have pulled off those very creative asset-backed securities and investment packages that sent the global financial market in a reverberating catastrophe? The human desire to fill the wants knows no bounds.
This is historic. The first law to be passed amongst EU member states that touches on the financial market. In which case, it is early to be pessimistic as to totally lose all optimism. I am sure you expect as much as I do that the nitty-gritty guidelines and rules to enforce such will be fool-proof enough so that the objectives of the measure are achieved.
P.S.
I’d like to give my tribute to James Tobin, the Nobel laureate whose idea the FTT was made the basis for.
