The IMF raised doubts about a tax on financial trading a group of European states is due to bring in next year, saying other levies may be more efficient ways of obtaining revenues from the financial sector.
"According to the IMF there are other levies that could be better than the Financial Transaction Tax (FTT)", Carlo Cottarelli, head of the International Monetary Fund's fiscal affairs division, said. Following concerns expressed by Italy and France about imposing the tax to government debt and legal challenges from Britain, however, the European Commission signalled readiness to soften the tax both reducing the rate on specific assets and delaying its roll-out.
"I don't want to comment specifically on the FTT proposed by the European Commission, but it is clear that if you reduce the tax base you will have an impact on revenue", Cottarelli said. "Let's see if the 11 European countries are able to find a good compromise on the tax base." Looking at the experience of Italy and France, where an FTT already exists, Cottarelli said such a levy had a negative impact on transaction volumes.
"Even if in Italy and France financial trading taxes have a low tax rate, there is evidence that the volume of transactions fell following the introduction of these taxes", he said, adding there is no evidence the levy reduces the volatility of trading.
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