Tobin tax gets green light after more member states pledge support
EUROPE - The number of countries backing the EU's proposed financial transactions tax (FTT) increased this week, with Italy, Spain, Estonia and Slovakia pledging their support.
In September 2011, the European Commission issued a proposal for the introduction of a controversial directive that contains an FTT at 0.1% for transactions in bonds and equities, and 0.01% for derivatives transactions.
While France and Germany - the two countries that originally pushed for the introduction of the tax - received support from Belgium, Austria, Slovenia, Portugal and Greece, one more member state's approval was still needed to use 'enhanced cooperation'.
Under European Commission rules, a minimum of nine countries must signal their intent to press ahead with the FTT before enhanced cooperation can be put in place.
Italy, Spain, Estonia and Slovakia's recent pledges of support brings the number of European member states backing the FTT to 11.
Anni Podimata, the MEP spearheading Parliament's position on establishing the tax, said: "I welcome the decision of 11 member states to introduce a financial transaction tax under enhanced cooperation on the basis of the Commission proposal of September 2011.
"It is a socially fair tax, an indispensible part of a complete and coherent solution to exit the crisis."
She went on to say that the support of four additional member states was "a reward" for Parliament, which has been calling for an FTT for more than two years.
"It will contribute to shifting the burden from the citizens to the financial industry - which has not yet contributed its fair share to the cost of the crisis," she said.
"It will target the most speculative activities and at the same time provide finances equal to more than half of the EU's annual budget at a time of intense fiscal consolidation."
The UK and a number of industry umbrella groups and academics has been fierce critics of the tax.
According to an earlier study by Ernst & Young, the FTT could end up costing public finances €116bn a result of falling tax revenues and a decline in GDP of 1.8%.
France's EDHEC Risk Institute meanwhile predicted that the Tobin tax, named after Nobel laureate James Tobin, was unlikely to reduce overall volatility.
EDHEC Business School professor Raman Uppal said: "The Tobin tax reduces speculative activity in financial markets, but this tax also drives away investors who provide liquidity and stabilise prices."
In March, pension funds were told they would be exempt from the tax under a new resolution passed by the EU's Economic and Monetary Affairs Committee earlier this year.