European Parliament approves proposal to tax financial transactions

Thu, May 24, 2012, 01:00

STRASBOURG:MEPs MEETING in Strasbourg have backed a proposal to introduce a tax on financial transactions across the EU.

The plan was adopted with 487 votes in favour, 152 against and 46 abstentions. Pension funds will not be subject to the tax.

Supporters of the proposal say it would ensure the financial sector contributes to covering the costs of the debt crisis while going a long way towards stamping out banks’ risky behaviour and raising much-needed funds.

On Tuesday, EU economics commissioner Olli Rehn said the tax had the potential to raise €57 billion in revenue that could be used for targeted investment.

Irish MEP Nessa Childers welcomed the decision, saying the financial sector needed to contribute to recovery. “The financial sector was a major cause of the crisis and yet has received over €4 trillion in public support in recent years, in Ireland and around Europe . . . They must now make a fair contribution to our public finances.”

Opponents say it will strangle the financial sector. In a lively debate on the proposal in parliament, British MEP Godfrey Bloom said it was an example of “greedy bureaucrats wanting your money”.

The proposed tax rates involve a 0.01 per cent levy on shares and bonds and 0.01 per cent on derivatives. Through an “issuance principle”, financial institutions outside the taxed area would also pay the tax, provided the transactions made by them related to assets within the taxed area.

The EU parliament has been calling for such a tax for almost two years with the latest Eurobarometer survey showing 66 per cent of Europeans in favour of it.

The author of the proposal, Greek socialist Anni Podimata, said the tax should go ahead even if some member states object to it.

However, implementing the tax will not be easy. While parliament has sent a strong signal by backing the tax, it only has consultation rights on taxation matters. A decision must be made unanimously in the European Council and several member states, including the UK and Sweden, are opposed to it.

Minister for Finance Michael Noonan has said he would only be in favour of the tax if it were rolled out on an EU-wide basis. “If, as some countries have proposed, the tax was to be brought in under enhanced co-operation arrangements, we would fear we could lose business to London,” he said after a question by Fianna Fáil’s Micheál Martin last February.