But are all taxes equally bad for the economy? I've been arguing that low rates of taxes on Financial Transactions would be a very straightforward and easy to implement solution, and indeed there are 11 EU countries who are implementing some such scheme.
We are told that such schemes are unlikely to be effective, because the transactions will move elsewhere. Well, how about simply imposing a transaction tax on the large-value payment systems that are a central part of the European Union? Specifically, what about simply charging a transaction fee for using the TARGET2 system (TRans-European Automated Real-time Gross Settlement Express Transfer System)?
The European Central Bank provides detailed information on its website about the value of transactions handled by the system. I have just downloaded all the data since 2009, and compiled a table where you can see just how much has been processed by the system, as well as by a second privately operated system called EURO 1. Here are the results.
There's also a breakdown by country, and you can see that 30.8% was handled in Germany, followed by 17.4% in France and 16.6% in Italy. Nearly all the transactions involve the 17 Eurozone countries.
Currently, the Eurosystem charges users with one of two parallel schemes:
- Recurring fixed charges and a fixed transaction fee
- Monthly fixed charge: €100.00
- Single transaction price: €0.80
- Recurring fixed charge and a variable transaction fee based on number of transactions
- Monthly fixed charge: €1,250.00
- Variable transaction price: volume-based between €0.60 and €0.125
Of course, the banks will no doubt scream that this is outrageous and that it will wreck the economy. But I would say that they are lucky that they don't have to pay the 2-3% fee that all the rest of us typically pay when we make a credit card payment in a foreign currency (the "foreign transaction fee").
The hundreds of billions of euros that could be generated by such a tax would go a long way to getting the Eurosystem back on its feet. The revenue could be divided between the 17 Eurozone countries depending simply on the population size of each country. And each country could use the revenue as it wishes - either to pay off government debt, restore public spending, or reduce taxes.
Seems reasonable to me.