Italy Backs EU Financial Transactions Tax

by Ulrika Lomas, Tax-News.com, Brussels

16 January 2012

Italy, under the new leadership of Prime Minister Mario Monti, has voiced support for the introduction of taxes on European financial transactions.

Monti said at a press event on January 11, 2012, that Italy would back the proposals, being championed by France with cautious support from Germany, even if the proposals did not receive the full support of all European Union nations. Monti indicated that Italy would continue to back the levy even if it were to be rolled out in just seventeen of the EU's 27 member states.

Proposals for a 'Tobin' tax have drawn strong criticism from Britain and Malta with their strong financial services sectors, as well as Sweden and Denmark, jointly on the grounds that it would weaken the competitiveness of European financial centres and cause banks to reconsider operations in Europe.

Under plans outlined by the European Commission in September 2011, a 0.1% tax would be imposed on the trading of shares and bonds, while a 0.01% rate would apply to other products, such as complex derivatives. To mitigate the risk of relocation, the levy would be imposed on the financial institution at their place of residence.

It has been estimated that an EU transactions tax would raise in the order of EUR55bn (USD70bn) per year, although it is not clear yet how such revenues would be allocated and what they would be used to fund.

However, in a report from the Adam Smith Institute, published on the topic in November, European decision makers were warned against introducing such a tax, the report stating that not only would a tax do significant economic damage, it would fail to raise the significant revenue that leaders anticipate, and increase market volatility in the process.

The think tank's research demonstrates that, based on European Commission impact assessments, a financial transactions tax would cost the UK economy GBP25.5bn (USD40bn), and EU member state economies GBP185bn in the long-term.

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