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Magic bullet or fairytale? Examining the arguments for a financial transaction tax

Thursday 10 June 2010 - by Daniel Sage


Hillman does not rule out an FTT either. He says: “The most important thing to remember is whether or not there is a political will to make this happen. The IMF proposals do not remove the need for an FTT: this depends on the political will and political will is growing.”

Looking at the UK context, Hillman considers the emergence of the Conservative-Liberal Democrat coalition as more “propitious” for advocates of an FTT, stating how the inclusion of the Liberal Democrats, particularly Business Secretary Vince Cable, “may well allow more possibilities” for the campaign.

Others think not. UK think-tank Reform’s chief economist Dr Patrick Nolan thinks that the aims of the FTT campaign will not be met. He says that international plans are firmly focused on insurance to protect against future crises, not poverty reduction, international development or even deficit reduction. With insurance the increasing concern for policymakers, Nolan says that an FTT is “not the right mechanism to achieve it”.

Although those in favour of an FTT will see a resolution fund as disappointing, it might be as ambitious as a truly global agreement can get. Evidence of worldwide disagreement over banking reform suggests that the probability of a global consensus on the more radical transactions tax is very low.


German finance minister Wolfgang Schäeuble recently said he feared that the US will not join international efforts for an FTT, while countries such as Canada, Japan and India have expressed scepticism about a global levy.
Even within Europe, Hiba Sameen, an analyst at UK think-tank Policy Exchange, says: “One can already see the cracks emerging in the EU. I think that any explicit international coordination of regulation would be very difficult to implement on a global scale.”


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