A Euro Model for the Tobin Tax? The (Possible) Impact of the Tax on the European Financial Market (and on the Non-EU Investors)

This article offers an overview of the Financial Transaction Tax (FTT) proposed by the European Commission, with a focus on its innovative character and origins in the "Tobin Tax". The study examines the FTT’s potential impact on the European financial market and non-EU investors. The FTT is notable for being the first tax introduced in the European Union under enhanced cooperation, a procedure allowing certain Member States to implement legislation when unanimity has not been achieved. Moreover, it is the first tax based on the principle of issuance of the underlying asset, irrespective of the taxpayer's residence, thus affecting even non-EU investors. The analysis includes a literature review of academic discourse on the FTT, discussing its objectives, potential economic ramifications, challenges in implementation, and the behavioral changes it may induce among market participants. Key findings highlight that the FTT, while aiming to generate revenue and stabilize markets, faces challenges such as potential market disruption, tax avoidance, and the complexity of ensuring harmonization across different legal systems. The article concludes by discussing the implications of the FTT’s implementation, emphasizing the need for an “all in, all out” approach to avoid distortions and ensure effectiveness.