Can a ‘Robin Hood’ City tax help cure EU’s woes?

EUROPEAN Commission president Jose Manuel Barroso's proposal for a financial transaction tax (FTT) comes amid growing tension over Britain's relationship with Europe. The FTT would apply to all 27 EU countries and the EC says it could raise 55 billion euros (£47bn) a year ensuring the sector made "a fair contribution" in an austere economic climate. It might be popular, but would this 'Robin Hood' tax work?
 
A disaster for the city

This is a populist proposal, not a productive one, says an editorial in the Financial Times. If the point is to tax banks and other financial institutions more heavily, there are "less distorting and less avoidable" forms of taxation such as taxing financial companies' balance sheets - as the UK bank levy does. Europe is searching "for a silver bullet", but this isn't it.
 
Great! With some of Europe's largest banks under threat, the European Commission has come up with a unique proposal – tax them more, says an editorial in the Daily Telegraph. The political attractions of the tax are obvious. "Banks remain deeply unpopular and voters will cheer on any attempt to punish them." But for the City, where 80 per cent of the new tax would be levied, "it would be a disaster".
 
Transactions will fall, reducing tax revenue

You'd think that after a decade of creating one of the world's biggest financial powder keg in living memory, the leaders of the EU would have a little humility about their tax plans, blogs Sam Bowman for Adamsmith.org. But Barroso's proposal confirms that "they plan to throw more gunpowder onto the keg".
 
The tax probably wouldn't raise anything like the EU predicts as the volume of transactions would fall. Trading funds can and will move country if the financial incentives are there. When Brazil tried a financial transaction tax (now abandoned) it didn't raise much. "Mind you, the British government might be tempted to favour a Eurozone-only tax, as it would probably drive quite a few funds to the City of London."
 
Goldman Sachs could be a hero

Oh come on, says the actor Bill Nighy in the Guardian. This is better than a Hollywood script. In the midst of a financial crisis, "a small band of merry men and women take on the world's titans of finance and make them pay their fair share to society". Goldman Sachs could end up being a hero by contributing millions to the poor. It's not as far fetched as it seems, and the EU proposal could make it a reality.

Nighy, a leading campaigner for the Robin Hood tax,  says the argument that this tax would only work if it was global "is risible". The UK's stamp duty on shares, introduced in 1694, is the largest such tax in the world "with no noticeable effect on the City's status as a leading global financial centre". ·