The most important battles are generally the hardest fought. Such is the case of the financial transactions tax (FTT), a crucial element in the creation of a more just global financial system, which is facing renewed opposition from those who want to maintain the failed economic architecture of the past.
Just a few months ago, the establishment of a 'Robin Hood Tax' in Europe seemed imminent, as France, Germany and nine other EU countries agreed to implement the measure with the dual objectives of reducing market instability while also raising revenue for poverty reduction and to fight climate change. It is estimated this tiny levy - just 0.1 percent - on the exchange of shares and bonds would raise approximately 57 billion euros if deployed across the EU. Earlier momentum now seems to be faltering, however, as states debate collection systems and, crucially, how the revenue gathered should be used.
Progress towards the FTT has also been challenged by the Legal Service of the Council of Europe (LSCE), which issued a paper last month affirming the mechanism was not compatible with jurisdictional requirements set out in existing EU treaties. Thankfully, the office of the European Union Tax Commissioner moved swiftly to reject this position, with a spokeswoman stating that the LSCE argument was just one of a variety of opinions on the matter, and adding: "We stand firm that the proposed financial transaction tax is legally sound and fully in line with the EU treaties and international tax law." Meanwhile, Germany's Social Democrats, who are about to enter coalition talks with Angela Merkel's Christian Democratic Party, are pushing to make implementation of the FTT a precondition for participation in a European banking union.
While it is to be welcomed that the proposing countries - Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain - seem resolute in their determination to push ahead with the plan, the LSCE paper has emboldened opposition from the UK and the United States. The importance of overcoming such obstacles cannot be overstated. The limited European FTT will be crucial to disprove the arguments of finance sector lobbyists, who doggedly insist it will undermine competitiveness and provoke mass relocations by financial firms. These affirmations fly in the face of the experience of many countries - including the UK and France along with fast-growing economies such as Brazil and India - where such mechanisms are already in use, but fear-mongering from the finance sector continues nonetheless. Should those who are seeking to block the European FTT succeed, campaigns pushing for similar measures in the US and further afield could find their task more difficult.
In this uncertain context, human rights defenders and social justice advocates are continuing their campaign efforts on both sides of the Atlantic. On October 30, a coalition of some 160 organizations in the US will stage a march on Capitol Hill before holding a briefing for members of Congress. This initiative follows just a few weeks after the Occupy Wall Street movement celebrated its second anniversary by renewing calls for the FTT to be implemented in the US. In Europe, meanwhile, FTT campaigners are currently designing strategies for further mobilizations around key dates in the political calendar.
The potential of the financial transactions tax to generate innovative resources for sustainable development was repeatedly highlighted when member states gathered at the United Nations recently to discuss the process for agreeing a new post-2015 global development agenda. And these points were reiterated again just a few weeks later at the High-Level Dialogue on Financing for Development.
Support for the Robin Hood Tax is spreading, but those who oppose it are powerful and determined. In the months ahead, it will be critically important to ensure the coalition of European states moving forward with the FTT stays the course. Effective civil society mobilization will also be necessary to make sure revenues generated by the mechanism are indeed used for tackling poverty, realizing rights and averting catastrophic climate change, rather than wasted on pay backs to private bondholders. Beyond this, continued efforts will be required to achieve the goal of implementation in the rest of Europe, the United States and beyond. The road so far has proven that achieving these objectives is unlikely to be easy. But then, Robin Hood never was one to avoid a fight.
This blog article was written by CESR Researcher and Communications Coordinator Luke Holland for the website of Righting Finance: A Bottom-Up Approach to Righting Financial Regulation