22 December 2011

Oxera reviews the European Commission’s economic impact assessment of the proposed financial transaction tax

This review focuses on the principal elements of the Commission's economic impact assessment and considers selected unintended consequences not included in that assessment. It concludes that the FTT will have a negative impact on the EU economy.

Full conclusions

The proposed FTT is likely to have significant and highly uncertain negative impact on the economy of the EU – not just for the financial centres such as London but for all business and investors in the EU. The Commission’s impact assessment already finds a significant negative impact, yet Oxera’s review suggests that the negative economic impact is likely to be larger than the Commission expects (or alternatively, the revenue raised by the tax will be much lower). With the additional uncertainty of financial service relocation and capital flight outside of the EU as well as “unintended consequences, the overall likelihood of the proposed tax increasing the  total net tax revenues of the EU governments is uncertain.

In this context, Oxera would suggest that it would be important for the EU tax authorities to examine further the potential economic impact before a decision can be made on the proposed FTT.

Full document

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