EU Transaction Tax Would Sap Liquidity

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Source Fena, 07. 09. 2010.
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Sept. 7 (Bloomberg) -- European financial regulators should use a banking levy to control financial markets instead of a transaction tax to keep markets liquid and protect government revenue, Swedish Finance Minister Anders Borg said.

European Union finance ministers are in Brussels today to decide what measures to impose to improve national budget management within the bloc and how to curtail market turmoil through stricter regulation.

Sweden attempted a transaction tax and “basically, our futures trading, our bond trading and our stock trading to a large extent just moved to London,” Borg said in an interview with Francine Lacqua on Bloomberg TV’s Countdown program before the meeting. “If we would introduce a unilateral European system, it’s quite likely the trading will move to the U.S. or Switzerland. It’s not a system that can work actually.”

Borg said there’s “a lot” of opposition to a transaction tax, which will “increase the risks and make the markets less liquid.” Such a measure is “quite likely to reduce our public revenues because we will lose in capital gains taxes and if the trading moves elsewhere, the taxes will also move elsewhere. If we want to protect our public finances, we should go for a banking levy rather than a transaction tax.”