UK Chancellor Attacks ‘Suicidal’ Tobin Tax Plans
Wednesday November 16 2011 | 08:41 AM

With its finances in a perilous state, Europe should not be creating new burdens such as that represented by a financial transactions tax (FTT), the UK Chancellor of the Exchequer George Osborne has said.

Writing in the London Evening Standard, Osborne stressed that stability must be restored, and that only once this immediate danger has been overcome can the eurozone contemplate the gradual pooling of resources and greater mutual control of tax and spending decisions.

He argued that both the UK and the European Union (EU) should be removing the obstacles to job creation and economic growth. To impose a Tobin tax would achieve the opposite, he said, arguing that: "The EU should be coming forward with new ideas to promote growth, not undermine it."

Osborne wrote that while the government is in favour of ensuring the financial sector pays more tax, a Tobin tax is not the way to tackle the situation. He noted that, in his time as Chancellor, he has introduced the UK's first permanent levy on banks, and that the government is taking long overdue action against tax avoidance and evasion by the very rich.

Osborne's overriding complaint against plans for a Europe-only FTT that did not include the US or China is that this would represent "economic suicide for Britain and for Europe". He sees the tax as a "bullet aimed at the heart of London".

According to a recent report by the Adam Smith Institute, a Tobin tax would cripple the UK economy by destroying derivatives trading in the City of London. The City accounts for 74.4% of interest rate derivatives turnover within the EU. The Institute has said that an FTT would lead to a reduction in the market volume of transactions, thus considerably shrinking the tax base, offsetting the apparent revenue gained from the tax. A decline in investment would follow, which, combined with the elimination of derivatives trading, would lead to job losses and an exodus of companies from the City.