* EU's tax commissioner says close to deal on trading tax
* Group of 11 euro zone countries set to pioneer levy
* EU approval will allow group to finalise details
By John O'Donnell
BRUSSELS, Jan 18 A group of euro zone countries,
led by Germany and France, looks set for a green light next week
to push ahead with a tax on financial transactions, a step
politicians hope will please voters but which critics have
warned could backfire.
The levy, based on an idea proposed of U.S. economist James
Tobin more than 40 years ago, is symbolically important in
showing that politicians, who fumbled their way through Europe's
five-year financial crisis, are getting to grips with the banks
blamed for causing it.
A go-ahead from EU finance ministers, who meet in Brussels
on Tuesday, would allow the group of 11 states within the
17-nation currency bloc - including Italy, Spain, Austria and
Belgium - to start preparations for their own trading tax.
Berlin and Paris decided to push ahead in a smaller group
under a special arrangement called "enhanced cooperation", which
requires the support of a majority of EU countries, after
negotiations to impose such a tax across the 27-nation European
Union, or even just the euro zone countries, failed.
"Citizens have been calling for an FTT (financial
transactions tax) for some time now," said Algirdas Semeta, the
European Commissioner in charge of tax policy. "I believe we're
very close to delivering on this demand."
EU diplomats said they also expected a go-ahead. "We expect
the decision ... will be taken on Tuesday," one said.
If the splinter group can agree on the details of a proposal
which will be drafted by the executive European Commission, the
tax could be imposed within months.
But its introduction might open another rift in Europe,
where the 17 countries using the euro are deepening ties in
order to underpin the currency, and there is a growing risk that
Britain could even leave by EU.
Some countries are already counting on the new income and
there are many proposals how it should be spent. Officials had
estimated that a similar scheme proposed for all 27 countries in
the EU could have raised 57 billion euros ($76 billion) a year.
But while a welcome windfall for countries where shrinking
economies and rising unemployment are sapping other tax income,
critics have long argued that the FTT will do little but drive
"You cannot put a transaction tax on a financial sector the
size of Luxembourg's and expect it to survive," said
Jean-Jacques Rommes, Chief Executive Officer of the Luxembourg
Bankers' Association. "Business will go elsewhere."
Semeta said the tax, which his officials hope can cut down
computer-driven high-frequency trading by imposing a charge on
split-second trades, would not burden normal investors.
"Around 85 percent of the transactions that will be taxed
take place purely between financial institutions," he said.
"The very low rates we've proposed will help to avoid
knock-on effects for the real economy, even if banks do try to
pass on the costs," Semeta said.
The tax, championed by Germany's Finance Minister Wolfgang
Schaeuble, has irritated many in Frankfurt, the country's
financial centre and rival to London.
London, Europe's biggest stock and derivatives trading
centre, will not take part in the scheme but deals struck there
may be subject to the levy if one of the parties involved is
based in a country which applies the tax.
The European Commission has suggested taxing stock and bond
trades at the rate of 0.1 percent and derivatives trades at 0.01