Financial transaction tax tabled by European Commission
Posted Feb 15 2013 3:23am
The European Commission has tabled its controversial financial transaction tax (FTT), despite the fact that only 11 member states out of 27 support it.
The tax, proposed by Commissioner Algirdas Semeta in Brussels, has been adopted by 11 eurozone states, including France, Germany and Spain.
The FTT aims to raise public funds and encourage more responsible trading by financial institutions.
Commission President Jose Manuel Barroso pushed ahead with the tax, despite opposition.
But there are fears it will catch non-participating countries in its net.
The levy, set at 0.1% for shares and bonds and 0.01% for derivatives, will apply to all transactions "with an established link to the FTT-zone", the European Commission said in a statement, and could raise 30-35bn euros (£26-30bn; $40-47bn) a year.
Mr Semeta, commissioner responsible for taxation, said: "On the table is an unquestionably fair and technically sound tax, which will strengthen our single market and temper irresponsible trading."
The tax will apply if any party to the transaction is based in a participating member state, regardless of where the transaction takes place - the so-called "residence principle" - and it is this provision that is causing the most controversy.
Chas Roy-Chowdhury, head of taxation at the the Association of Chartered Certified Accountants (ACCA) told the BBC: "This tax is actually quite draconian and bad for the eurozone. It will drive a coach and horses through the single market and force banks to relocate outside the FTT zone."
The tax, known as the Tobin tax after the economist who came up with the idea, was proposed by the EC in September 2011.
But the 27 member states could not agree, with Britain in particular voicing opposition to the proposal.
As a result 11 eurozone countries applied to go it alone under "enhanced co-operation" rules.
The Commission agreed and the European Union's Council of Finance Ministers adopted the proposal in January 2013.