11 EU nations to work on new financial tax
January 23, 2013, Wednesday
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A GROUP of 11 European Union countries was given the go-ahead yesterday to work on the introduction of a tax on financial transactions.
The tax is designed to help pay for the rescue of Europe's banks and discourage risky trading. It would apply to anyone in the 11 countries who makes a bond or share trade or bets on the market using complex financial products called derivatives.
EU Tax Commissioner Algirdas Semeta said after a meeting of the bloc's 27 finance ministers that the decision marked a "major milestone for EU tax policies."
The plan is to use some of the revenue raised from the tax, which could run into tens of billions of euros, to prop up shaky banks. This would help out governments, which have had to pay for bank rescues in the past. Some supporters of the tax have also suggested that part of the revenue could help fund the EU's budget.
"The financial sector must appropriately participate in bearing the cost of the financial crisis," German Finance Minister Wolfgang Schaeuble said in a statement.
Europe's banking industry has been one of the main causes of the eurozone's three-year financial crisis. Governments in Spain and Ireland have had to rescue their banks, which had been brought close to collapse by bad property investments. These rescues caused the governments' levels of debt to rise to dangerously high levels.
The crisis was also exacerbated by market speculators using derivatives to make risky bets on how the market in a particular product would move. The European Commission, the EU's executive arm, has proposed that trades in bonds and shares be taxed at 0.1 percent and trades in derivatives at 0.01 percent.
Semeta had no immediate estimate of how much revenue the tax would generate, but he noted that the commission had previously estimated that such a tax across the 27-nation bloc could yield 57 billion euros a year. The 11 nations pushing ahead represent about two-thirds of the EU's economy, he said.
Germany, France and nine other nations had initially hoped the tax would be adopted by the entire EU. But several countries, including the UK, home to the EU's biggest financial hub, refused to back the measure on concerns over its economic impact.
Yesterday's decision cleared a legal hurdle by allowing the group of nations involved to go ahead without the backing of all 27 nations.
The tax is designed to help pay for the rescue of Europe's banks and discourage risky trading. It would apply to anyone in the 11 countries who makes a bond or share trade or bets on the market using complex financial products called derivatives.
EU Tax Commissioner Algirdas Semeta said after a meeting of the bloc's 27 finance ministers that the decision marked a "major milestone for EU tax policies."
The plan is to use some of the revenue raised from the tax, which could run into tens of billions of euros, to prop up shaky banks. This would help out governments, which have had to pay for bank rescues in the past. Some supporters of the tax have also suggested that part of the revenue could help fund the EU's budget.
"The financial sector must appropriately participate in bearing the cost of the financial crisis," German Finance Minister Wolfgang Schaeuble said in a statement.
Europe's banking industry has been one of the main causes of the eurozone's three-year financial crisis. Governments in Spain and Ireland have had to rescue their banks, which had been brought close to collapse by bad property investments. These rescues caused the governments' levels of debt to rise to dangerously high levels.
The crisis was also exacerbated by market speculators using derivatives to make risky bets on how the market in a particular product would move. The European Commission, the EU's executive arm, has proposed that trades in bonds and shares be taxed at 0.1 percent and trades in derivatives at 0.01 percent.
Semeta had no immediate estimate of how much revenue the tax would generate, but he noted that the commission had previously estimated that such a tax across the 27-nation bloc could yield 57 billion euros a year. The 11 nations pushing ahead represent about two-thirds of the EU's economy, he said.
Germany, France and nine other nations had initially hoped the tax would be adopted by the entire EU. But several countries, including the UK, home to the EU's biggest financial hub, refused to back the measure on concerns over its economic impact.
Yesterday's decision cleared a legal hurdle by allowing the group of nations involved to go ahead without the backing of all 27 nations.
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