Britain and the US have voiced concerns to proposals published yesterday in Brussels on a financial transactions tax.
Details of the new tax, which is expected to generate between €30-€35 million per year from the financial industry, were announced in Brussels yesterday by EU commissioner Algirdas Semeta .
Eleven states, including France and Germany, have signed up to the tax, which has been introduced through the EU’s “enhanced co-operation” procedure which allows at least nine states to move ahead with measures if agreement from all 27 member states is not reached.
Controversially Britain and Ireland have opted out of the tax.
The new tax levies 0.1 per cent of the value of any trade in shares or bonds and 0.01 per cent of financial derivative contracts.
Controversially, the tax includes a “residence principle” which means that tax will be due if any party to the transaction is established in a participating member state regardless of where the transaction takes place.
An issuance clause was also added to the proposal presented yesterday as an “anti-avoidance measure”. The result is that financial instruments issued in the 11 countries will be taxed when traded even if those trading them are not established in the FTT-zone.
‘Irresponsible trading’
As with the original proposal, the tax will not apply to day-to-day financial activities of citizens or businesses. The ECB, EFSF and ESM are also exempt from the FTT.
Mr Semeta said the tax proposal was an “unquestionably fair and technically-sound tax, with will strengthen the single market and temper irresponsible trading”.
He said Spain and Italy had already indicated an interest in joining.
The financial sector is currently under-taxed by about €18 billion a year, according to the European Commission, which argues that the financial sector should make a larger contribution to the public finances, particularly after the various rescue operations of the financial sector that have been financed by the taxpayer.
However, the investment community in the UK and US have voiced concerns about the tax, in particular the possibility of double taxation.
