09/28/2011 08:44 am ET Updated Dec 06, 2017

EU Financial Transaction Tax: EU Says Tax Would Raise 57B Euros Annually

STRASBOURG, France, Sept 28 (Reuters) - The European Union's executive proposed a bloc-wide tax on financial transactions that would set a rate of 0.1 percent on bond and stock trades and raise 57 billion euros a year, but Britain said it would only support a global levy.

The EU's executive European Commission formally adopted on Wednesday plans for a financial transaction tax from January 2014, which it hoped would be extended worldwide.

The measure will need approval from EU states to become effective.

"With this proposal the European Union becomes a forerunner in the global implementation of a financial transaction tax," EU Tax Commissioner, Algirdas Semeta, said in a statement.

"Our project is sound and workable. I have no doubt this tax can deliver what EU citizens expect -- a fair contribution from the financial sector. I am confident that our partners in the G20 will see their interest in following this path."

Stock and bond trades would be taxed at the rate of 0.1 percent, with derivatives at 0.01 percent.

The EU executive said the tax would be imposed on all transactions in financial instruments between financial firms when at least one party to the trade is based in the bloc.

The revenue would be divided between the EU's own budget to cut national contributions, with the rest going directly to member states.

The Group of 20 forum has tried and failed in the past year to agree on a global transaction tax as many countries fear it would be too easy for financial firms to evade.

Canada, Britain, the United States, Australia and China oppose the tax because it puts more burden on banks, while France, Germany, Austria, Belgium, Norway and Spain support it, along with several African states.

Britain, the EU's biggest financial centre, reiterated on Wednesday such a tax would only work globally.

"The government will continue to engage with its international partners on Financial Transaction Taxes and has no objection to them in principle. But any financial transaction tax would have to apply globally and there are a number of practical issues that need to be worked through," a UK Treasury spokesman said.

Without Britain's backing, there may be an attempt to introduce the tax at first only in the 17 euro zone countries.

"The proposal would introduce new minimum tax rates and harmonise different existing taxes on financial transactions in the EU," the executive added.

Britain, for example, already imposes a small stamp duty tax on share trades and has also introduced a levy on bank balance sheets.

A European Commission impact study on the tax said there are strong risks of transactions relocating to countries not applying the levy.

With a tax rate of 0.1 percent, the Commission's models showed drops of up to 1.76 percent in gross domestic product in the long run.

(Reporting by Fiona Shaikh and Huw Jones in London and Francesco Guarascio in Strasbourg, France; Editing by John Stonestreet)

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