The European Commission estimates a new financial transaction tax in 11 EU countries will raise up to €35 billion annually.

EU taxation commissioner Algirdas Šemeta presents revised draft legislation today for the tax on the financial industry intended to cover the cost of future crises.

According to the Süddeutsche Zeitung yesterday, the tax will apply whenever the buyer or seller of shares, bonds or derivatives comes from one of the 11 countries introducing the tax. These are Germany, France, Belgium, Estonia, Greece, Spain, Portugal, Italy, Austria, Slovenia and Slovakia. As yet undecided are Denmark, Lithuania and the Netherlands.

Not participating

Ireland is following Britain in not participating for fears of putting the IFSC at a competitive disadvantage to the City of London.

But neither country will be excluded entirely. If a British bank trades shares on behalf of Volkswagen, for instance, the tax will be due to the German tax authorities.

To close further loopholes, the commission proposes taxing all products created in one of the 11 participating countries. Thus a Chinese bank selling French sovereign bonds banks to a US client in Singapore will still have to transfer the appropriate tax to Paris.

Excluded from the tax, according to reports, will be private share trades, credit card purchases, the purchase of crisis-hit euro country bonds and business of the European Central Bank (ECB).

The commission points out that it is up to the 11 member states how quickly they agree to introduce the tax, although a date of January 1st, 2014, is seen as possible.

German officials were cautious about that timetable yesterday, pointing out that many details had yet to be agreed, such as how to collect taxes on trades outside of Europe that involve participating EU countries.

German election

They are doubtful, too, of the chances of transposing the directive into German domestic law during a federal election year.

The Merkel administration has never been a passionate supporter of the tax in only part of the EU, but agreed to push it as part of domestic horse-trading with the opposition Social Democrats (SPD), which has insisted that Cyprus adopt the tax as a condition for Bundestag support for German aid to the crisis-hit island economy.