No fallout from European trading tax

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The idea of a transaction tax on securities transactions has been off-and-on in U.S. for years now. While it has never gained significant traction, it has moved to the cusp of reality in Europe.

Reuters reports that, "Germany, France and nine other countries are pushing ahead with the tax on trades in stocks, bonds and derivatives, keen to show voters they can claw back some of the taxpayers' money used to bail out banks during the 2007-2009 financial crisis. However, bankers and finance industry experts are skeptical about a tax that will not be imposed even in all 17 euro zone members, let alone in Europe's biggest financial center, London."

The problem with such an unevenly imposed tax is that it will be easy to evade. The drafters of the law understood that this would be the case, and they structured the tax so that it would encompass both buyers and sellers, if either is in a country that is party to the tax.

Reuters also notes that, "Britain and Switzerland will remain on the outside its scope. Major banks such as Deutsche Bank, BNP Paribas and Unicredit already have big London legal entities and operations that handle much of their wholesale operations and could shift more to them if it proved cheaper."

So who loses?

One group is smaller trading and investing operations that are not pan-European in nature, and thus might not be readily able to shift their transactions. Also, it's still possible that the rule might extend to "securities issued by a company within a participating country. If this were included, trading houses in Asia and the United States would have to pay a tax on bonds and stocks issued by companies and governments in the participating countries."

So what are the chances the U.S. follows suit? At this point, the chances are low. But revenue will be a key issue in Washington over the next few months.

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