Barroso said the Commission would seek to implement a tax on financial transactions to address concerns about the profits obtained in the financial sector.
However, EU member states have different ideas about how to make the financial sector bear the risks of another crisis. For example, the UK government indicated in its budget in March that it intended to introduce a bank levy, but the Commission, which is set to release an impact assessment on the FTT this week, has a different focus.
Barroso emphasised the need to restrain risky trading across the EU and make sure that financial sector taxation does not differ significantly at a national level.
The rate of tax being considered is thought to be between 0.01% and 0.05% of the value of the transaction. The Commission hopes the tax will raise €200 billion ($286 billion) annually.
Support for a financial transactions tax is strong across Europe, with both France and Germany stoutly backing its implementation. Simon Chouffot, a spokesman for the Robin Hood Tax Campaign, a development agency-led initiative pressing for an FTT, stated that this was the key to bringing the tax into effect.
“The British government is dragging its heels at the moment, but if they continue to do so they risk looking isolated,” he said.
Chouffot was also keen to emphasise that international support was providing momentum to the campaign for an FTT.
“We’ve moved beyond the position of it only being a good idea and now it seems to be a question of when rather than how,” said Chouffot.
With the Commission adding its weight to that of Europe’s economic powerhouses Germany and France, Chouffot was confident that “2011 is definitely the year for [a financial transactions tax] to happen.”
Global implementation
However despite supporters’ optimism, the UK government still stress the need for any such tax introduced to apply worldwide. A treasury spokesman said last week that global implementation was the only feasible option.
“The government believes that any financial transaction tax would have to apply globally – otherwise the transactions covered would simply relocate to countries not applying the tax,” The spokesman said.
“There is no way in the world we could get the US behind this,” Chouffot conceded.
Despite the Robin Hood Tax Campaign’s optimism, it does not seem that the international support required is forthcoming.
Michael Devereux, professor of business taxation at Oxford University, doubts the practicability of agreement even at a European level, even with the more enthusiastic view of continental governments.
“The politics of it at the moment are unlikely to survive even at a European level. If you can get 27 member states to agree then that would be a start,” Devereux said.
Devereux also questioned a key argument of those in favour of the tax that there are already taxes payable on financial transactions across the EU and an additional tax would do little to discourage trading here. In the UK, the government’s £3billion ($4.8 billion) revenue from stamp duty on trading in shares is cited as proof that the FTT proposed would have no effect on the level of trading in Britain.
“It is difficult to know how much more trading would there might be in the UK if we didn’t have stamp duty. I don’t think you can say [an FTT] would have no effect on the amount of trading in the UK, Devereux said. ”It would be surprising if there wasn’t some migration of trades to outside the EU”
Given the Treasury’s comments, such a sentiment seems closely aligned to the UK government’s stance on the issue. Unless at least New York and Hong Kong, if not other global financial hubs, support an FTT it seems unlikely that the measure will have a clear passage into law in Europe since member states retain a veto on tax proposals.
Even so, the Commission’s studied consideration and apparent desire to introduce such a tax may prove a staging post in ultimately introducing an FTT. The Commission’s impact assessment this week may see the start of a groundswell of international support which will exert pressure on other financial centres to consider the tax.
