European Commission adopted a proposal for the financial transaction tax

Newsroom 28/09/2011 | 16:39

The European Commission has approved today the proposal for a financial transaction tax in the EU27. The tax would be levied on all transaction on financial instruments between financial institutions when at least one party to the transaction is located in the EU. According to the proposition, the exchange of shares and bond would be taxed at a rate of 0.1 percent and derivatives contracts, at a rate of 0.01 percent. This could raise approximately EUR 57 billion every year. The tax is proposed to come into effect starting 2014.

The revenues of the tax would be shared between the EU and the Member states. A share of the tax would be used as an EU own resource to reduce national contributions. Members States will be able to increase their revenue by imposing a higher taxation rate.

“It is a question of fairness. If our farmers, if our workers, if all the sectors of the economy from industry to agriculture to services, if they all pay a contribution to the society also the banking sector should make a contribution to the society”, said Jose Barroso, president of the EC, in the State of the Union Address.

Since the beginning of the crisis, EU Member States have committed EUR 4.6 trillion to bail out the financial sector. In addition the financial sector benefits from VAT exemption leading to an annual advantage of approximately EUR 18 billion.

The financial transaction tax aims at taxing the 85 percent of financial transactions that take place between financial institutions. This should discourage risky and unproductive trading, and contribute to the economic recovery.