Commission not yet convinced on transaction tax

Despite various calls for the introduction on an EU-wide tax on financial transactions (FTT), the European Commission is still considering the idea and wants to conclude further studies before putting forward a formal proposal.

Speaking at the European Parliament earlier this week, European Taxation Commissioner Algirdas Semeta refused to throw his weight behind a financial transaction tax, insisting the “jury is still out” on whether it would prove the most effective way of recouping the costs of the banking crisis.

“Many policy makers in the EU – and I am one of them – believe there is a political and economic case for taxing the financial sector,” but “the jury is still out, however, on the best way to do this.”

MEPs estimate a 0.05 per cent fee on each trade in stocks, bonds and derivatives could raise up to €200 billion a year for cash-strapped European governments, but the Commission – backed by the European Central Bank and some EU member states – is hesitant about going it alone for fear of losing business to cheaper financial centres.

The US, Australia and Canada last year blocked moves to introduce a global charge although France, at the helm of the G20 this year, is pushing its partners to reconsider their position. Germany is also in favour of a global FTT, while Belgium has already laid the ground for an EU-wide tax to be introduced.

Although Malta has not yet set its position, sources said that it will be favourable if a global agreement is reached.

The Commission is known to favour an IMF-inspired financial activities tax on bank profits and pay, although Mr Semeta’s team is currently putting together an impact assessment on an FTT after repeated calls were made by parliamentarians.

The latest call came in a report by Greek Socialist MEP Anni Podimata.

According to Sharon Bowels, president of the Economic and Monetary Affairs Committee of the European Parliament, “now that the financial sector looks like it’s doing well again it might make sense to consider taxing it.”

Socialist French MEP Pervenche Berès, a former president of the same committee, has also backed calls for an FTT in her final report for Parliament’s temporary financial crisis committee published this week.

A summit of EU leaders last June urged the G20 to “reconsider” the introduction of a global transaction tax on banks.

However, until now, the Commission has not tabled a new proposal.