March 8, 2011 / 1:24 PM / 8 years ago

EU assembly backs euro zone bank transaction tax

STRASBOURG, France, March 8 (Reuters) - European Union lawmakers overwhelmingly backed a call to tax financial transactions on Tuesday and make banks pay up to 200 billion euros ($278.3 billion) for damage they caused to the economy.

The 529-to-127 vote is non-binding but its call for legislation will be hard for the EU’s executive Commission to ignore.

“We want to send out an institutional signal saying that the private sector bears its part of the responsibility for the crisis,” Martin Schulz, the leader of the group of legislators from the socialists and democrats, told parliament.

The EU should push for a global transaction tax but, “failing that, the EU should implement a financial transaction tax at the European level as a first step”, the resolution said.

The Commission should swiftly produce a feasibility study and come forward with concrete legislative proposals, it added.

A tax that would cover transactions such as derivatives would reduce speculation and public deficits, parliament’s resolution said.

A 0.05 percent tax would bring in nearly 200 billion euros in the EU, rising to 650 billion at the global level.

France and Germany have already pushed for a global transaction tax at the Group of 20 (G20) level, but faced opposition from the United States and Canada.

It is often referred to as a Tobin Tax, after the U.S. economist who promoted it in the 1970s.

A less ambitious push for an EU-level transaction tax has made little headway so far and German Chancellor Angela Merkel’s party has suggested a transaction tax for some or all of the 17 euro zone countries as a starting point. [ID:nLDE7130N9]

A Commission official said the executive will publish its impact assessment on taxes before the summer break.

EU Tax Commissioner Algirdas Semeta has already said the best way to tax banks is with a global transaction tax and, failing that, a financial activities tax at the EU level.

Britain, which has introduced what is effectively an activities tax levied on a bank’s balance sheet, is against an EU Tobin tax.

“Imposing a tax of this nature without a global agreement would cause some of our financial services sector to relocate, losing the UK billions in tax revenues and costing untold jobs,” said Vicky Ford, a Conservative UK member of the EU assembly.

Semeta is also looking at the broader issue of financial services tax as they are exempt from valued-added tax (VAT).

He travels to Paris on Wednesday for a meeting with the French government, currently holding the G20 presidency, to “discuss how the Commission can support France in pushing forward the idea of the financial transaction tax at the global level”, the Commission official said. (Writing by Huw Jones; Editing by Rex Merrifield and David Holmes) ($1=.7185 Euro)

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