Would an EU financial tax work?
As a move toward some kind of financial tax within the EU continues to gain pace and momentum, with only the UK and French governments opposing the move at the moment, more and more people are wondering whether an EU financial tax would work. What are the upsides and what are the downsides to such a move?
The obvious upside is that some form of bailout fund which is financed by the financial sector would not be a direct tax on investors although it could be described as a "stealth tax". The ability to maintain a healthy bailout fund in the background in the events of unforeseen problems in the future could in many ways help to avoid such issues. However, the downside, as put forward by the UK and the French governments, is the fact that such a "safety net" would not only be expensive but could offer an insurance which might encourage undue risk-taking in the future.
If the EU was also to push ahead with the financial tax without any international agreement this would most certainly place European at a great disadvantage to other financial centres. The authorities need to weigh up the pros and cons of the issue and decide which is the lesser of two evils.
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