The politics of taxing financial transactions in the EU

This chapter looks at the politics of Financial Transaction Tax (FTT) in the EU. It argues that the original European Commission proposal in 2011 to tax transactions of equities and derivatives in the secondary market quickly triggered a battle of ideas. Pro-FTT actors highlighted the moral and normative desirability of the FTT and argued that it would yield significant revenue in service of the post-financial crisis recovery. The financial sector actors on the other hand suggested that the proposal contradicted the market fundamentals, would harm the financial markets, and hence would not yield the projected revenue. The financial sector won the debate in the end; the proposal has not been implemented. The chapter firstly explains the normative and market-related arguments formulated by opposing camps against one another. It then surveys the structural, institutional, and ideational reasons discussed in the literature to explain why and how the financial sector won the battle.