Yesterday, a lively debate on financial sector taxation took place in the European Parliament. The debate centred around the Commission proposal on the introduction of a European Financial Transaction Tax (FTT). According to the proposal, the exchange of shares and bonds would be taxed at a rate of 0.1% and derivative contracts, at a rate of 0.01%. This could approximately raise € 57 billion every year. The financial lobby has since been using all its powers to prevent such thing to happen. First, there was victimization: "We are already on our knees, please do not further step on our sensitive hearts". This quickly turned into a more aggressive tone: "If you would start taxing us, we will run away and take with us your economy".

Machiavelli’s famous “never waste the opportunity offered by a good crisis” has been orally exhausted by most of Europe's leaders. The current crisis could be seen as a wormhole to a new type of capitalist society. Everything is possible. And yet, the reflex to go back to the roaring nineties is gaining momentum again. A strange form of conservatism is taking over Europe. The debate on the FTT is exemplary in this.

Although current day's Zeitgeist is not up for it, it will not hurt anyone to focus on some facts.

Excessive borrowing and deregulated markets have created the biggest legal Ponzi scheme in history and eventually led to the symbolic fall of Lehman Brothers in 2008. In the European Union alone, the European Commission reported that government support for the since troubled financial sector amounts for €4.500 billion, or €4.5 trillion. This money has been provided for by tax payers, the majority coming from income taxes.

The government support came at a high price. The vast majority of European countries are currently imposing tough austerity measures on their populations in order to reduce public expenditure. Conservative/Liberal Europe tries to convince us that we owe the crisis to reckless public spending and big governments. A remarkable observation, since most government balance sheets were doing just fine before the financial crisis. If you look at it in a cynical way, we have spent trillions of Euros to save and uphold a dangerous financial sector. As a consequence, no money is left for investing in our future. We are embracing the past, whereas it spat us in the face.

I am not a cynical person by nature, but there is something wrong when most of our "reckless" spending came from saving a foolhardy and “too big to fail” financial sector. Asking something back from the financials is merely our duty, especially since their financial products are still not being taxed as other products like cigarettes, clothes and gas. There is no VAT on stocks, nor excise duties on OTC derivatives. All financial transactions cross our borders free of charge. Some of these products have even been labelled weapons of mass destruction by the most hardened hedge fund managers.

So, a sector that is fundamentally under taxed is now being asked to pay its share in government revenues. Who, in the European Parliament, would oppose such a proposal? Next to the British conservatives and the usual far right representation, it becomes clear that the European Christian Democrats do not see the need to introduce such a tax at this moment.

German Christian Democrat MEP Markus Ferber is against an FTT because it is not a panacea for the crisis and because there is a risk that investment banks run away from the continent. In yesterday's meeting, he mumbled something about lack of liquidity and loss of GDP. It is clear that the biggest group in the European Parliament finds itself in the same cart as the financial lobby groups.

In order to spice up the debate, the European Parliament invited a panel of three experts, consisting of Columbia University Professor Stephany Griffith-Jones, UBS head of research Avinash Persaud and ex investment banker Sony Kapoor. They wrote a report in which they debunked all the misconceptions concerning the FTT. They came to the conclusion that an FTT would help stabilize the wonky financial system and raise additional revenue for the cash strapped governments.

Countries like South Korea, India, Brazil, Taiwan, South Africa and Switzerland have long ago introduced an FTT and are known as fast growing economies. A visible contradiction with financial lobby claims that an FTT would drag us all into poverty. The United Kingdom and Hong Kong, two of the largest financial centres in the world, tax transactions every time ownership on financial titles changes. In the UK, such a duty is 5 times higher than the Commission's proposal for an FTT. To speak with Zygmunt Bauman: "We are living in liquid times".

Markus Ferber is right that the FTT is not a panacea for the financial crisis. It is just a way to raise revenue and tax a sector that still remains outside of regular taxation. On the other hand, not looking for alternative state revenue means deepening austerity or borrowing from future generations. Exactly the medicine conservatives are currently applying to their sick patient. Next time income tax is raised and wages are being lowered, think of the conservative stance against an FTT.

Picture Source: http://www.flickr.com/photos/robinhoodtax/6305464327/sizes/l/in/photostream/