1. Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies www.wiiw.ac.at Searching new ways for financing the EU budget - on the proposal of a European tax on foreign exchange Sándor Richter richter@wiiw.ac.at Ökosoziales Forum Europa 21. Jänner 2008

2.  wiiw 2 Why to introduce an EU tax?  The current system and the ‘fair return‘ attitude  From a Union of member states towards a Union of citizens and firms  EU is provider of public goods, EU beneficiaries (citizens and firms) should pay directly for them  Mismatch: increasing redistributive power at EU level but no own resources at EU level

3.  wiiw 3 What taxes are proposed?  Income taxes  Taxes on real economy transactions  Taxes on financial transactions

4.  wiiw 4 How to decide? The criteria 1 Creating a Union of the citizens Financial autonomy Visibility, transparency and simplicity Allocation of resources along EU policies (externalities) 2 Budgetary aspects Sufficiency Stability Cost–effectiveness 3 Equity (fair sharing of the burdens) Horizontal equity Vertical equity Fair contribution across member states

5.  wiiw 5 Foreign exchange transactions: main indicators Average daily global value of foreign exchange transactions (April 2004) $ 1 880 billion Annual value of foreign exchange transactions (2004)$ 460 000 billion of which: Global annual exports of goods and services $ 11 069 billion (2.4%) Global annual FDI outflows $ 730 billion (0. 2%)

6.  wiiw 6 Geographical distribution of reported foreign exchange market turnover, 2004 share in %

7.  wiiw 7 Estimations for the revenues from a foreign exchange tax Estimations for the European Union: France MF $ 22 billion Spahn $ 17- 21 billion Belgium MF $ 9 – 39 billion Jetin $ 47 billion

8.  wiiw 8 Foreign exchange transaction tax revenue estimates for 2004 USD billion

9.  wiiw 9 Open questions to be answered -Revenues from tax on foreign exchange transactions for the EU or for the Third World? -Foreign exchange tax at global or European level - how to avoid relocation? -The UK´s role and the free riders - fair contribution of burdens? -Are there no more suitable candidates for a European tax?