IREF

This is the decrease in the rate of economic growth per capita that results from an increase in the tax revenue to GDP ratio by 10 percentage points. This is…

EU Parliament had been calling for a financial transaction tax (FTT) for nearly two years and, unsurprisingly, it has adopted last week the proposal drafted by the Commission. One of the arguments that prevailed in the debate that took place at the Parliament and resulted in the adoption of the financial transaction tax proposal was that “the FTT is an integral part of an exit from crisis. It will bring a fairer distribution of the weight of the crisis” (rapporteur Anni Podimata).

According to the Tax Foundation, this year U.S. citizens will pay more than $4 trillion in total federal, state and local taxes. That sum “is $152 billion, or 3.9%, more than they will spend on housing, food, and clothing combined. The data shows that from 1929 to 1980 tax liabilities grew from $10 billion to $751 billion. But expenditures on housing, food, and clothing still was more than that final sum, growing from $41.6 billion to $775.7 billion.

The UK Peers have attacked plans by the European Commission for a Europe-wide financial transaction tax, warning that if introduced, the UK could account for 71% of the revenue it would raise. It is unclear, they said, why the financial sector should be targeted, and the FTT proposal’s reversal of the trend towards horizontal measures is rendering it inappropriate as an EU revenue source.

Everything seems to go wrong in Spain and Madrid’s policy to achieve broader deficit reduction targets looks inappropriate. The Spanish government’s introduction of new legislation to restrict interest deductions for taxation purposes could further reduce the flow of international capital into domestic commercial property, exactly at a time when the depressed local market is an important factor weighing on Spain’s recession-hit economy, the European Public Real Estate Association (EPRA) said.

Executive Summary

The main purpose of this paper is to investigate whether, and to which extent, the rules introduced by central governments effectively restrain the spending behaviour of the decentralized authorities. In this paper, the authors provide an innovative comparative analysis by considering two countries that share the same degree of economic development and many cultural traits – France and Italy. Yet, these two countries differ in one crucial respect. France has a tradition of strong centralization, bureaucratic discipline and detailed technocratic control on the periphery (the regions). By contrast, Italy is known to follow a more flexible approach, which allows for some negotiation between the central and the peripheral authorities and feeds expectations for assistance and bail-outs, should the regions engage in excessive spending and violate the budgetary rules set by the centre.

This is the expected revenue from the financial transaction tax promoted by the EU. The proposal is expected to come into effect from 1st January 2014 and applies to the transactions carried out by financial institutions (banks, investment firms, insurance undertakings, collective investment undertakings, etc.) acting as party to a transaction, either for their own account or for the account of other persons. Most financial instruments (securities, bonds, etc.) and derivatives thereof (such as options or swaps) will be covered by the tax.

In recent years, the Baltic States have been showcased as an austerity success story. While the whole world has seen countries such as Greece, Spain and Portugal struggling to reduce their public spending, Lithuania has been hailed as an austerity example. Lithuanian success in public spending cuts has been widely acknowledged; yet simultaneous tax increases and their harmful effects have received less attention. Since the end of 2011, however, the country once again found itself embroiled in a budget crisis and is now moving down the dangerous road of tax hikes.

If adopted as a new own resource of the EU budget the financial transaction tax (FTT) will significantly reduce the contributions of member states to the EU budget, according to estimates presented yesterday by the European Commission. Member States’ contributions would be slashed by €54bn in 2020.The Commission proposes that two thirds of the revenues of the FTT go to the EU budget, reducing by the same amounts Member States’ contributions based on their GNI, with the remaining one third being retained by Member States.

Last March 30, the Spanish Government announced its most important measures to reduce the fiscal deficit for 2012. These actions have been based on reducing public spending and, again, increasing taxes. “Again” because on December 30, 2011, the conservative new Government already raised the Personal Income Tax, making Spain one of Europe’s most heavily taxed countries.