Thursday, September 29, 2011

Finding tax sources that fit today's economy

Financial Transaction Tax: Making the financial sector pay its fair share
Brussels, 28 September 2011 – Today the Commission has presented a proposal for a financial transaction tax in the 27 Member States of the European Union. The tax would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU. The exchange of shares and bonds would be taxed at a rate of 0.1% and derivative contracts, at a rate of 0.01%. This could approximately raise €57 billion every year. The Commission has proposed that the tax should come into effect from 1st January 2014.

The Commission has decided to propose a new tax on financial transactions for two reasons.
"First, to ensure that the financial sector makes a fair contribution at a time of fiscal consolidation in the Member States. The financial sector played a role in the origins of the economic crisis. Governments and European citizens at large have borne the cost of massive taxpayer-funded bailouts to support the financial sector. Furthermore, the sector is currently under-taxed by comparison to other sectors. The proposal would generate significant additional tax revenue from the financial sector to contribute to public finances.

"Second, a coordinated framework at EU level would help to strengthen the EU single market. Today, 10 Member States have a form of a financial transaction tax in place. The proposal would introduce new minimum tax rates and harmonise different existing taxes on financial transactions in the EU.. This will help to reduce competitive distortions in the single market, discourage risky trading activities and complement regulatory measures aimed at avoiding future crises. The financial transaction tax at EU level would strengthen the EU's position to promote common rules for the introduction of such a tax at global level, notably through the G20..."
The proposal to tax financial transactions has been fiercely attacked by speculators, hedge fund traders and wealthy investors.

Business attacks transaction tax plan
José Manuel Barroso, the European Commission president, said the tax could raise some €55bn ($75bn) a year to replenish government coffers.

“It is a question of fairness,” he said, arguing that the public sector had already contributed more than €4,000bn in guarantees to help banks through the crisis. “It is time for the financial sector to make a contribution back to society.”
Icap paints Tobin tax grimly to fend off evils
"More to the point, transactions tax would need unanimous approval from the 27 member states of the European Union. The UK government would surely veto it. Mr Spencer, a Tory with a taste for the film noir-influenced paintings of Jack Vettriano, said the very discussion was “borderline laughable”.

"The City’s big beasts will trust the government to forestall the Tobin tax. But they fear George Osborne could in the process be pressured into smaller concessions that would be damaging..."

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