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The European Commission has outlined common rules for the introduction of its proposed financial transactions tax.
Unveiling details of the Commission’s plans to the European parliament in Strasbourg, European Union (EU) Commissioner for Taxation Algirdas Semeta claimed that there is growing support for the levy and expressed his confidence that the tax can indeed be introduced in the EU.
Defending the introduction of a tax on financial transactions, Semeta argued that the levy would ensure that the financial sector pays its fair share of public policy financing. It would discourage some unproductive forms of trading, he added, and would ensure a better functioning of the internal market, which remains the main source of growth in the European Union.
He said that: “In general member states agree with the idea that banks should be taxed more. Those who disagree, disagree on an instrument, which they do not know yet.”
Semeta emphasized that the planned EU tax has a wide scope, affecting most financial products. He explained that a 0.1% rate would be imposed on shares and bonds, while a 0.01% rate would apply to other products.
Determined to mitigate the risk of relocation, the Commission plans to impose the levy on the financial institution at their place of residence. Under the Commission’s plans the tax will focus on transactions that take place between financial institutions, representing 85% of all financial transactions.
Transactions of individuals, such as credit card payments or private loans, savings or insurance contracts will fall out of the scope of the tax, Semeta emphasized, adding that transactions directly linked to the financing of the productive economy, such as the primary issuance of shares and bonds, would not be taxed either, nor would loans to businesses and spot foreign exchange transactions. This, he maintained, will preserve the financing capacity of small- and medium-sized enterprises.
Concluding his statement, Semeta pointed out that currently ten member states have a form of financial transaction tax in place, therefore introducing such a tax at European Union level will serve to harmonize the way banks are taxed.
This tax will generate revenue of EUR57bn (USD76bn) a year, the Commissioner revealed, noting that this amount would be shared between the European and national budgets.
Emphasizing the Commission’s commitment to promoting a financial transaction tax at global level, Semeta explained that in view of the forthcoming G20 summit meeting in Cannes, the Commission will continue working for a global agreement.
“We are looking forward to see this tax adopted first at European level and then at global level”, the Commissioner ended.
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