EU Financial Transaction Tax: Own Resource or Public Good? Michael J.Randall University of Strathclyde

Confusion About the aims of the European Commission’s Financial Transaction Tax Conflation of terms in public discussion: “Financial Transaction Tax” “Tobin Tax” “Robin Hood Tax” “European Commission’s Financial Transaction Tax” “Enhanced Cooperation Financial Transaction Tax” Differences in aims and scope Mislabelling as being designed exclusively to raise revenue (i.e. own resources) could damage a legitimate policy aim Prior to 2011 European Commission Proposal: Communication from the Commission “Taxation of the Financial Sector” Com (2010) 549 Final 7th October 2009

Public Good Theory Cross Disciplinary in nature: - Adam Smith: ‘Wealth of Nations’ (1776) pg.559 - P Samuelson, ‘The Pure Theory of Public Expenditure’ (1955) 36 Review of Economics and Statistics 387 - M Olson, The Logic of Collective Action (Harvard University Press 1965) - E Petersmann, International Economic Law in the 21st Century: Constitutional Pluralism and Multilevel Governance of Interdependent Public Goods (Hart Publishing 2012) Provides tools to classify actions in a manner to encourage governmental intervention to achieve a particular outcome The greater the degree of intervention required, the greater the amount of government expenditure required to maintain and improve the situation Public goods require public provision, whereas if a good is classed as private this should be resourced by the private sector

Determining Public Goods and Relation to Taxation Good must be ‘non-rival’ or ‘indivisible’ Good must be ‘non-excludable’ Particular success in environmental protection regulation e.g. Montreal Protocol on Substances That Deplete the Ozone Layer [1987] Club Goods Are non-rival, but exclusive. Good Corporate Governance can be a club good: G Kordel, ‘Behavioural Corporate Governance From a Regulatory Perspective: Potentials and Limits of Regulatory Intervention to Impact the Conduct of Corporate Actors’ (2008) 9(1) European Business Organization Law Review 29 Public Goods and Taxation Tax raises funds for governments to provide public goods i.e. socialised healthcare Legislation to introduce a behavioural tax can provide a public good by effect

Conclusions Framing an tax on financial transactions as ‘Own Resources’ can lead to a lack of support Taxation can be used to provide public goods A sustainable financial sector is a public good For taxation of the financial sector the primary emphasis should be placed on providing a public good through behaviour modification Failure to do this can lead to the tax being misrepresented and not achieving public good aims Incentive for financial sector to participate if good corporate governance is a club good