In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers about the financial-transaction tax proposed by 11 EU member states.
What is the most important obstacle to implementation of a proposed financial-transaction tax by 11 EU member states?
Led by France and Germany, 11 out of 27 EU member states have agreed to levy a financial-transaction tax on stocks, bonds, derivatives, repurchase agreements and securities lending. These 11 states are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. The main intended objective of the tax is "to receive a fair and substantial contribution from the financial sector to the financing of the rescue operations from which it benefited either directly or indirectly."
When we asked readers what the most important obstacle is to the tax's implementation, a clear majority (53%) of the 504 respondents chose uncertain consequences, such as decreased liquidity or relocation of financial activities from the concerned states. A minority of those surveyed (19%) indicated that the pressure against the tax from the financial-services sector is the most important obstacle, and 14% cited lack of support from other EU states. The response of our readers is intuitive. To deal with such a tax, market participants will change their behavior in ways that cannot be fully anticipated ex ante. If and how the tax should be levied and whether or not it would succeed in meeting its objectives are not just matters of "what if" quantitative analysis but also of political judgment. To learn more about the tax, read our blog post.
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