THE EUROPEAN Commission says investment firms should join deposit-takers such as AIB and Bank of Ireland in the payment of an annual “bank tax” into a special fund to insure against any future financial collapse.

Saying an EU-wide system of national funds should operate according to the “polluter pays” principle, internal markets commissioner Michel Barnier said it was not acceptable that taxpayers should continue to bear the heavy cost of rescuing banks.

The plan puts the commission on collision course with London and Paris, both of which say funds raised by the tax should go directly into their national budgets.

The tax would be imposed far beyond the realm of traditional high street banks to include investment firms whose business comes within the ambit of the 2006 EU capital requirements directive.

The commission will present the plan to EU leaders before G20 leaders discuss a wider global initiative at a summit next month in Toronto.

The Government will “carefully consider” the proposal. “It is important that initiatives in this area are carefully co-ordinated and that any EU proposal would complement the work being done at G20 level,” said a spokesman.

The commission described the system as a “first step” towards a wider EU fund, something which could put institutions throughout the union on the hook for mistakes made in markets in which they have no presence.

Mr Barnier left open key details, declining to specify the amount of money that should be raised by the tax. Billions of euro would be needed, and officials say it could take many years to build up funds of sufficient scale.

The commissioner did not say whether the tax should be levied on profits or calculated according to balance sheet size, but said the institutions with riskiest business should pay most. He will publish legislation, which must be agreed by EU states and MEPs, early next year. “It needs to be clear that the purpose is to facilitate an orderly failure of an insolvent bank, not to bail it out,” said the commission.

“This is very important in order to combat the moral hazard that might arise with the creation of a large fund.”

The funds would be used to finance operations to transfer a business to a temporary “bridge bank” or separate clean and toxic assets between good and bad banks.

They could also be used to maintain some operations before a sale or wind-down.

“We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future,” Mr Barnier said.