The idea, which became a formal proposal in September 2011, was for an EU-wide financial transactions tax of 0.1 per cent on the value of all transactions in shares and bonds, and of 0.01 per cent on deals involving derivatives linked to equities, interest rates and currencies. The initial calculation was that at such levels it would generate an annual €57bn (£48bn), with the bulk of that revenue going directly to the governments of the individual member states. The UK, for instance, would stand to receive around €10bn (£8.43bn) according to the EC’s official study on the subject. More recently that overall figure has been revised downwards to an annual €30bn to €35bn (£25bn to £29bn).
A year later, after EU members had failed to reach unanimity on the proposal, it was agreed that a financial transactions tax could be introduced under a scheme of so-called enhanced co-operation. This involved a minimum of nine member states working on a particular project within the structure of the EU, implementing legislation with the idea that members outside the group could emulate with their own national version later. In the event 11 member states, representing more than 90 per cent of the EU’s gross domestic product, supported the idea. In February the EC put forward a revised proposal for a financial transactions tax to be introduced under enhanced co-operation and that proposal now awaits approval (which must be unanimous) by the European Parliament.
The 11 countries planning to take part in the EU financial transactions tax are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. France actually went further and introduced a 0.2 per cent tax on financial transactions in August 2012. Italy followed suit in February this year with a 0.12 per cent tax on all domestic operations with shares. Significantly the Italian regulation also included a 0.02 per cent tax on “the counter-value of orders automatically generated (including revocations or changes to original orders) by a computerised mathematical algorithm,” that is, on high-frequency trading orders.
Reaction to all this legislative activity has not been slow in coming. The financial sector has warned of dire consequences in terms of capital flight to other jurisdictions, reduced investment in further developing the capital markets in the EU and generally rendering the region an also-ran in the global trading landscape.
