A financial transactions tax (FTT) in Europe would almost certainly hinder market liquidity. It’s definitely an easy sell for politicians—they can target financial firms and the wealthy would carry a much larger share of the burden. But do we really want to make it more expensive for financial firms and banks to operate? Financial firms are already somewhat frozen in fear. Further uncertainty around costs can’t help.
Europe is already in pickle, so why not add more vinegar? That seems to be the thinking behind the European Commission’s proposed financial transactions tax (FTT) – the Commission’s latest response to Europe’s festering growth and financing problems. The emotional appeal of a tax on all financial transactions is undeniable. Ordinary Europeans have to pay value-added tax on most of the goods and services that they buy. so why not tax purchases of stocks, bonds, and all kinds of derivatives? Surely, such a tax will hit wealthy individuals and financial firms far more than anyone else, and, besides, it will raise a ton of revenue.