EUROPE - The European Commission has claimed that its proposed financial transaction tax could cut the amount that member states must contribute to the EU budget in half.

Under the Commission's latest proposal, two-thirds of the revenues from the controversial tax - also known as the Tobin tax - would go to the EU budget, reducing member states' contributions, based on their gross national income (GNI), by the same amount.

Member states would then keep the remaining one-third.

The Commission argued that every euro levied through the tax would therefore ultimately benefit the member states, "whether through direct revenue collection or through a reduction of contributions to the EU budget".

Under this plan, the Commission estimates that overall contributions to the EU budget in 2020 could be cut by as much as €54bn.

According to its calculations, France could slash its contribution by more than €8.7bn, while the UK could save more than €7.6bn, Italy €6.4bn, Spain €4.7bn, the Netherlands €2.6bn and Sweden €1.6bn.

When announcing the proposals, Janusz Lewandowski, financial programming and budget commissioner, pointed out that the financial sector did not pay VAT, yet had received "massive" taxpayer support.

"Taxing the transactions of all financial institutions at rates as low as 0.01% is only fair," he said. "Furthermore, the estimated revenue the tax would generate by 2020 can only be welcomed by cash-strapped governments across the EU."