(MENAFN - Kuwait News Agency (KUNA)) The plan to impose tax on financial transactions among 11 EU member states is a dangerous move that might harm Europe's economies rather than help to boost their competitiveness, according to a new study released here Wednesday.
Published by a Brussels-based think tank 'New Direction ' in cooperation with Captus, a Swedish think tank, the study argues that even low levels of taxes will force out trade to other nations.
The author of the study , Nima Sanandaji, from Captus, presenting the report at a press conference in Brussels said the motive to impose the financial tax is political.
He explained that financial institutions today have a bad image in Europe as they are being blamed for the financial crisis and hence EU officials think that tax on financial transacttions will not face stiff opposition .
Sanandaji , who is of Iranian origin, noted that people and companies might opt for countries outside of the EU such as Dubai, Singapore or New York to avoid the tax.
The study points out that overall tax levels in many EU member states are already so high that they significantly reduce incentives for work, education and entrepreneurship. Transaction tax on stock trading was imposed in Sweden in 1984, the result was that much of the trade migrated to New York and London. The costly policy was abandoned in 1991, noted the study.
Aviation taxes have recently been abolished after their introduction in the Netherlands and Denmark, since they had adverse effects on the economies. The study suggest that the best way to achieve debt reduction is a policy of decisive and lasting cuts in expenditure, and by growing the economy out of debt.