EU says financial tax would raise €57bn a year

EUThe European Commission says it could raise €57 billion a year with its proposal for a financial tax that would apply to the exchange of equities and bonds at a rate of 0.1% and derivatives contracts at a rate of 0.01%.

The tax would affect all transactions on financial instruments when at least one party is located in the EU, and the Commission is proposing that the rules come into effect on 1 January 2014.

The Commission said the tax would ensure that the financial sector, which received large taxpayer-funded bailouts in recent years, makes a fair contribution to the finances of the European Union at a time of economic strain.

But the industry has reacted with hostility. The Investment Management Association (IMA), the UK's trade body for investment firms, said the tax would make Europe less competitive.

“Any tax on financial transactions is highly likely to create distortions between Europe and other key financial centres, which can only result in a loss of business for the EU,” said Julie Patterson, director at the IMA.

Other commentators felt they could not trust the EU to spend the tax revenues fairly.

"Given the lack of transparency surrounding EU budgets, it seems questionable whether the EU Commission is an appropriate body to be redistributing wealth to European taxpayers,” said David Blair, regulation partner at UK law firm Osborne Clarke.

“In the event that such taxes were in fact devoted to, say, bolstering EU institutional expansion or the preservation of the euro, taxpayers may feel that the EU Commission's homage to Robin Hood lacks romantic substance.”

©2011 funds europe