With the European Union proposing the idea of a financial transaction tax, Swedish financial minister, Anders Borg, says he firmly disagrees with it based on the experiences of his own country implementing a similar tax.
In the 1980s Sweden began taxing all transactions conducted by financial firms. The end result was completely detrimental to the Swedish financial markets, causing the majority of firms in the country to relocate to more appealing financial jurisdictions. In fact, more than 90% of financial firms that traded bonds, equities, and derivatives in Stockholm relocated to London when the tax was imposed in Sweden.
Instead of generating additional tax revenue, the Swedish financial tax of the 80s did nothing more than cause an exodus of financial firms and discourage foreign investors from setting up businesses in Sweden.While the EU argues that the tax could generate millions in revenue, Borg and many others believe that it would simply motivate financial firms to move overseas.
To make matters worse, the US has openly stated it has no intention of implementing a similar financial transaction tax, so European financial firms would find it ideal to move their operations overseas if such a tax were implemented by the European Union. Fortunately, the United Kingdom has also expressed dislike for the tax, stating that it would “absolutely resist” any financial transaction tax that was not implemented on a global scale, in order to prevent the possibility of a large number of firms leaving the country suddenly.
Nonetheless, there are several European nations that are in favour of the financial transaction tax, including Austria, Belgium, France, Norway, and Spain. Fortunately, the EU has stated that it may only implement tax within the 17 states of the eurozone if several European Union members are still in opposition.