On 28 September the European Commission published a proposal for the introduction of a Financial Transaction Tax. France and Germany, the biggest members of the EU have endorsed the plan whilst the United Kingdom is strongly opposed to the tax as this will have a disproportionate impact on the country with the largest financial services center in Europe.
It is proposed that a 0.1% tax will be imposed by EU member states on bonds, shares and other derivative transactions. Under current levels, the scheme will raise €57 billion in tax in a bid to combat the Euro crisis and restore the coffers of the ECB which have been depleted following the bailing out the failing EU member states.
The proposal will require unanimous support from all EC member states before it can be implemented. Whether the transaction tax will receive the required support remains to be seen. Clearly a financial transactions tax will have a negative impact on the UK economy and hence it is strongly opposed in this country. However, any move to introduce the transaction tax will have interesting consequences for both traders and the banks as it could impair their ability to manipulate the stock markets through the use of sophisticated computer programmes. This could have a positive effect for small independent traders if it serves to filter out the inefficient big players in the market. Angela Merkel has already attempted to outlaw speculative short selling of the Euro and is clearly concerned about manipulation in the market.