(BRUSSELS) MNI – The European Commission Wednesday proposed to tax
from 2014 forward all stock and bond trades involving any financial
institution based in the EU at a rate of 0.1%, and all trading in
derivatives at a rate of 0.01%.

If approved, the new taxes could raise as much as E57 billion a
year, the Commission estimated. Some of that amount would be set aside
to fund the EU budget, reducing the contribution that national
governments make.

The controversial proposal, which is likely to face fierce
opposition from EU member states including the UK, which has a veto on
tax issues, aims to discourage what the EU’s executive institution sees
as risky market behaviour and to make sure that the financial sector
makes a substantial contribution to help public finances recoup the cost
of the financial crisis.

EU Member States have committed E 4.6 trillion to bail out the
financial sector during the crisis and the sector benefits from a Vat
exemption worth E18 billion, the Commission estimates.

“I have no doubt this tax can deliver what EU citizens expect: a
fair contribution from the financial sector,” said EU Tax Commissioner
Algirdas Semeta, in a statement.

Although the proposal aims to tax as broad a range of financial
institutions as possible, central banks, government entities and
companies raising capital on primary markets would be exempted under the
Commission’s plan, as would most financial transactions made by
individuals and small businesses.

The commission has also proposed to exclude the biggest source of
financial transactions, spot currency trading, since experts say that
including it could be problematic under the EU’s treaty, which provides
for the free movement of capital.

Giving some of the cash to the EU budget, however, is likely to
meet stiff opposition from a number of governments, not least London.
Even Berlin, one of the most enthusiastic supporters of financial
transaction taxes, also backed by Paris, is against Brussels getting its
hands on the money.

The UK government in particular has been critical of the
Commission’s plans. Unless applied globally, such taxes would simply
drive trading away from the City of London to financial centres outside
the EU, the authorities fear.

EU officials are hoping to convince world leaders to take up the
idea and could put the topic on the agenda of the next G20 summit in
Cannes, France, on November 3-4.

–Brussels Newsroom +324-9522-8374 pkoh@marketnews.com

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