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Who’s afraid of the FTT?

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Who’s afraid of the financial transactions tax (FTT)? Not well-known tax campaigner Richard Murphy, nor Dr Rolf Diemer, the EC official responsible for its implementation. In an interesting debate last Thursday evening (12 September) at the Law Society, these two were pitted against the more jittery Shaan Devnani of London Economics, and Sarah Wulff-Cochrane, director of policy for tax at the British Bankers’ Association.

The debate highlighted the deep differences in opinion over the desirability of the FTT and, at a higher level, over the causes of the financial crisis and role of the EU in managing it.

The FTT hawks, Diemer for the EC and Murphy, applauded the proposed tax: it would be a remedy for the under-taxation of the banks and ‘throw sand into the wheels’ of finance by inhibiting the rate and profitability of the overly complex and risky deals they blamed for the financial crisis. Diemer repeated the EC’s calculation that 75% of derivative transactions currently engaged in would not be economically viable if the FTT were passed.

The two panelists against the FTT also took a largely economic angle, criticising for instance the consequences it would have of increasing volatility and costs for all participants in the market, while referring in passing to the wider arguments regarding extraterritoriality aired by the UK in its challenge to the tax. Besides a slightly cryptic remark that reports of the FTT’s death were much exaggerated, Diemer declined to comment on the recently leaked EC legal opinion, which broadly supports the UK’s arguments. Meanwhile, the tenor of questions from the floor was unanimously anti-FTT, one speaker upping the sand/machine metaphor to superglue/watch.

The live-tweeting of the debate under the hashtag #TLSFTTdebate (total tweets: 52, 18 by Murphy, 23 by the Law Society) demonstrated the Law Society’s keenness to embrace new technology, but did not help to facilitate an exchange of views. Thus, there was no real response to the anti-FTT camp’s arguments that the proposed tax would increase volatility, that it was a ‘blunt instrument’ for addressing the problems it ostensibly targets, or that, ultimately, increased costs for processing transactions would be borne by consumers (although Murphy did express reservations about the credibility of such models). At the same time, the key argument made on the other side, that the FTT was a quick and easy way of curbing the excess of risk and under-taxation in the financial sector for the benefit of the financial system, was not substantively answered by either of the anti-FTT speakers.