The president of the European Commission called yesterday for the introduction of a so-called "Tobin tax" – potentially putting the body on a collision course with Britain.
During his state of the union address, José Manuel Barroso said he believed that a region-wide tax on financial transactions was needed. "Member states, I should say taxpayers, have granted aid and provided guarantees of €4.6trillion to the financial sector," he said. "It is time for the financial sector to make a contribution back to society."
Mr Barroso believes such a move could raise more than €55bn a year.
The tax is likely to meet opposition in the UK. The Treasury said yesterday that while it was not opposed to such a move "any financial transaction tax would have to apply globally". The Chancellor, George Osborne, fears a tax imposed in EU countries would simply see businesses relocate outside the bloc, increase market volatility and possibly effect GDP and employment.
The British Bankers' Association pointed out that the UK would be "particularly affected" by a transaction tax. "Four of every five financial transactions in the EU take place in the UK," a spokesman said.
The Confederation of British Industry also attacked the idea. Its deputy director-general, Neil Bentley, called the tax "completely misguided at a time when it is clear that Europe needs a relentless focus on growth".
The EC's own impact analysis showed that a tax could reduce the region's gross domestic product by more than €100bn, he said.
If Mr Barroso's proposals are voted through, the EC would impose a 0.1 per cent levy on share and bond transactions and 0.01 per cent on derivatives. The plan is in its early stages and must now be discussed by member states. It has to pass unopposed, and one source close to the Government said: "There is space for the UK to oppose it."
Such levies are dubbed "Tobin taxes" after the US Nobel prize-winning economist James Tobin. Last year, British celebrities, politicians and charities supported moves to implement a similar style "Robin Hood" tax. But Tom Aston, a financial services tax partner at KPMG, backed the Treasury's view, saying that the introduction of the tax would "fundamentally change, and in some cases destroy, the business models of financial institutions within Europe and will put them at a disadvantage unless implemented globally".Reuse content