Implementation of a Financial Transaction Tax by a Group of EU Member States. Estimation of Relocation Effects, of the Size and Distribution of Revenues and of the First-mover Advantage of the Participating Countries

The study investigates the effects of the implementation of the financial transaction tax (FTT) as conceptualised by the European Commission (EC) in a group of 11 EU countries. It is shown that the objections against this concept – recently put forward by Goldman Sachs and other banks heavily engaged in short-term trading – suffer from serious methodological flaws. Particular attention ist given to the potential use of London subsidiaries of financial institutions established in participating countries as vehicle for tax evasion. If London subsidiaries are treated as part of their parent company, overall FTT revenues of the 11 FTT countries are estimated at 65.8 billion €, more than estimated by the EC for the EU 27 as a whole. Roughly one quarter of these revenues would stem from transactions in North America and Asia. If London subsidiaries are treated as British financial institutions, tax revenues would amount to only 28.3 billion €. This difference is particularly great for those countries which operate to a significant extent through big subsidiaries in London like Germany and France.