Fair contribution by the financial sector

We are facing tough times. Financial and economic turbulence is shaking Europe. The budgets of European countries are under increasing strain and growth prospects are uncertain.

Our public finances and our European socio-economic model are at risk.

It’s blatantly clear that the risky behaviour of the financial sector has harmed the economy as a whole. European citizens at large have borne the cost of massive taxpayer-funded bailouts to support the financial sector. Now it is time for the financial sector to bear its fair share and to contribute better to public finances. It is also time to put a halt to risky market behaviours. In parallel to the financial markets regulatory reform, I believe taxation can be a key instrument in our response to the crisis.

For this reason, the Commission has proposed common rules to tax financial transactions between financial institutions in all 27 Member States of the European Union.

This financial transaction tax will raise much needed revenue to the budgets and discourage risky trading. Our proposition could raise approximately €57 billion a year.

Partly channeled through the European budget, it would allow the EU to fulfill its commitments towards global challenges like development and climate change. With their share of the revenues, European countries will be able to ease their consolidation efforts and invest in growth and jobs, ultimately one of the main concerns of our citizens.

Today, some European countries already have a financial tax. So why act at EU level? The current economic situation points in a clear direction: we need more Europe, not less. We should preserve and develop a strong integrated market, not a fragmented market. If each country defines its own way of taxing banks, it would create administrative complexity and unequal treatment. We cannot afford this. Adopting a financial transaction tax at EU level is only the first step.

Europe should lead by example and speak with one voice for the introduction of a global financial transaction tax with its partners in the G20. A global response is necessary because development and climate change challenges threaten us all.

Time is pressing. Our citizens want results. I have no doubt this tax can deliver what citizens expect. The financial sector needs to make a fair contribution to public finances and refocus financial transactions towards the real economy.

This would also empower us to achieve faster our “Europe 2020” objectives of long-lasting prosperity for all in Europe. The Commission has proposed. Let’s hope our member states will deliver.

Mr Šemeta is European Commissioner in charge of taxation, customs union, anti-fraud and audit.