The Euroland eleven who want to tax financial transactions are still grappling with definitions. While all of the European Union countries agree on taxing stock and bond sales they are in disarray over derivatives. GFMA SmartBrief reports that the leading proponent countries are split over the extent of the new tax, while striving to reach an accord before the European Parliament elections take place next month. Supporter countries include Germany. Italy, and France who want to woo voters with fierce “Tobin taxes” to be used to fund financial regulation and development. Other supporting countries are Spain, Belgium, Austria, Portugal, Greece, Estonia, Slovakia, and Slovenia. Now the Tobin tax group are fighting over whether or not to tax derivatives (like puts and calls on shares; credit default and interest rate swaps on bonds and credit instruments; currency futures; and other swaps and futures used to offset risk.)
The Parliament is a boring and toothless arm of the European Union and its politics are irrelevant. But getting in a good left-wing law may help the troubled governments and coalitions of the pro-Tobin tax countries.
This law matters because that the Euro 11 want to tax transactions worldwide, not just in the signatory EU countries. If the issuer, the intermediary, or the purchaser of the instrument being traded is located in the European Union–and that is a lot of countries– then even US trading of the stock, bond, or (perhaps) the derivative, would in theory be taxed too.
Some EU are skeptical that the tax will raise any revenues at all. They think all trading will move out of the EU to foreign markets. Among the skeptics in the same single market are countries with active financial markets like Britain, Ireland, Sweden, Finland, Denmark, Norway, the Netherlands, and Luxembourg, along with Czech Republic, Poland, Cyprus, Malta, Rumania, Bulgaria, Latvia and Lithuania.
Non-EU countries like the US, Canada, Japan, Hong Kong, Singapore, and Switzerland stand to gain a lot of business if this silly rule gets passed. The late Nobel Laureate economist James Tobin, an American, proposed a tax on currency trading to limit exchange rate transactions in 1972. Perhaps a better name for what the EU countries are proposing now is a “Robin Hood tax”, but the purpose now is to punish banks and brokerages, not to cut volatility.
More follows from Britain, Hong Kong, Finland, Israel, Spain, Portugal, China, Brazil, Colombia, Singapore, Denmark, Belgium, Australia, and Canada. We have an average down and a whole and a part sale today.
*With the eye of the market focusing on the issue of Alibaba shares to beginTuesday, note that our Tencent has another venture to rival it: a new video streaming service for first-run movies called Hollywood VIP, a jv where Warner Bros. has a minority stake. The idea is to rent movies to Chinese subscribers to stop digital piracy which cuts down on theater revenues. The TCTZF service is two years old but until now it only offered vintage rather than new movies. This is something like Netflix but the rental charges are much lower and of course most of the movies are Chinese. With fees as low as $1, Chinese netizens can view first-run movies 2 weeks after they open in theaters.
