Why critics are wrong about a financial-transaction tax

Far from sending taxpayers rushing for the exit, this tax gets more foreigners to pay it than any other.

“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” Arthur Schopenhauer could have been describing the journey of financial-transaction taxes (FTTs), which are somewhere between stages two and three. Exactly where will be revealed at the meeting of EU finance ministers on Tuesday (13 March), where the European Commission’s proposal for a 0.1% tax on bond and equity transactions and 0.01% on derivatives will be up for discussion.

Before the Great Contraction began in 2007, bankers had succeeded in painting FTTs as the concept of naïve idealists who knew little about the real workings of finance. This was quite a feat given that the idea had towering intellectual credentials. John Maynard Keynes had recommended it in his “General theory of employment, interest and money”, and a Nobel prize-winner, James Tobin, later developed it.

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