Barroso Champions EU Tobin Tax

by Ulrika Lomas, Tax-News.com, Brussels

30 September 2011

Despite bitter opposition from the UK, European Commission President José Manuel Barroso recently gave his formal support in the European parliament in Strasbourg for the introduction of a financial transactions tax in all 27 member states. According to Barroso, the tax could serve to yield EUR55bn (USD75bn) annually.

Underlining the fact that it is simply “a matter of fairness”, Barroso warned that it is now time that the financial sector makes a contribution to the financial crisis, particularly given that European Union (EU) countries have made available EUR460bn since the beginning of the crisis, predominantly as a guarantee for the financial sector.

Although the Commission President did not reveal any specific details of proposed plans for the tax, the legislative proposal reportedly provides for a tax to be levied from 2014 on the purchase and sale of securities, bonds, shares, and derivatives between banks, insurance companies, and all other financial institutions.

Adamant that the European Union will act as a forerunner for the global introduction of a tax levied on financial transactions, EU Tax Commissioner Algirdas Semeta recently underlined his conviction that the G20 partners will elect to follow suit.

Although the tax has the full support of the German Chancellor Angela Merkel and the French President Nicolas Sarkozy, Germany has, however, categorically ruled out the idea, put forward by Barroso, of using the revenues to fund the EU budget.

Vehemently opposed to the idea, the UK has already warned that it will not provide its backing for the tax. Commission President Barroso is now calling for an end to the unanimity rules that have served to hold up such key decisions within the European Union - but any such change would itself require unanimity. This impasse was solved previously through the introduction of 'variable geometry' - allowing a group of member states to take their own path. The eurozone itself is an example of variable geometry.

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