European governments are figuring out that taxing financial transactions won’t be a magical money machine and that the proposed levy might even damage the European economy.
Reuters first reported Thursday that EU officials are scaling back a transaction tax proposal supported by 11 countries that is supposed to take effect in January. The levy could instead be introduced on a “staggered basis,” one official told the news agency. The first phase might only tax sales and purchases of shares, not bonds or derivatives transactions, and at 0.01% instead of 0.1% as currently proposed. A rate of zero is more appropriate.
Enthusiasm for the tax has been dimming for a while, including in governments that have previously backed it. Christian Noyer, the Governor of the Banque de France, said in Paris on Tuesday that the levy will raise “nothing at all.” One unnamed EU official told Reuters that a scaled-back transaction tax would reap revenue of less than â‚¬3.5 billion. The full-fledged levy, as proposed by the European Commission in February, was supposed to rake in â‚¬31 billion a year.