September 9, 2011 / 1:25 PM / 6 years ago

UPDATE 2-Germany, France press for "Tobin" tax, UK opposed

* Berlin, Paris say Tobin tax could start in Europe first

* London rejects transaction tax in UK

* Banks warn market end users would end up paying (Adds UK, banks reaction, background)

By Noah Barkin and Fiona Shaikh

BERLIN/MARSEILLE, France, Sept 9 (Reuters) - Europe should press ahead with a tax on financial transactions even without international consensus, the German and French finance ministers said in a letter sent to the European Commission on Friday.

German Finance Minister Wolfgang Schaeuble and his French counterpart Francois Baroin urged in the letter seen by Reuters that the European Council presidency put the issue on its agenda in coming months.

“Although the Toronto G20 meeting demonstrated that a global agreement is very difficult to achieve, we strongly believe that the implementation of a financial transaction tax (FTT) at the European level would be a crucial step on the path to reaching a global consensus in a way that does not affect European competitiveness,” the letter said.

EU member Britain, home to Europe’s biggest financial centre, opposes what is commonly dubbed a “Tobin tax” on transactions.

“If the euro area would like to have a banks levy, that’s a matter for them. The UK will not be part of any euro area tax,” a UK Treasury spokesman told Reuters on the sidelines of a meeting in southern France of finance ministers of the world’s wealthiest nations.

The spokesman noted that Britain -- which has a “stamp duty” tax on share trades -- already had a levy on banks.

In response to a question from a lawmaker on Tuesday, UK Finance Minister George Osborne told Britain’s parliament: “I can assure the right honourable gentleman that I am certainly opposed to any new European tax.”

Unanimity would be required among EU states to impose a tax on a member country.

Schaeuble has said in the past that he favours pressing ahead with the tax within the 17-nation euro zone, but the letter made no mention of that, urging it be put in place “internationally or within the European Union”.

CUSTOMER PAYS?

Europe’s top banks said the impact of a transaction tax needed to be understood.

“Many financial transactions are carried out on behalf of businesses that would bear the cost of the additional tax,” said Simon Lewis, chief executive of the Association for Financial Markets in Europe (AFME).

The Franco-German letter said that finalising how to allocate funds raised by such a tax should not be a precondition for agreement to pursue it.

“The tax base should be broad and cover all financial transactions related to financial instruments such as equities, bonds, currency transactions and derivatives,” the letter said.

A preliminary outline of the FTT that was attached to the letter said over-the-counter (OTC) transactions, a vast market of securities traded between banks, should come within its scope.

Efforts to push through the tax at the G20 level have so far foundered, prompting European countries to consider acting alone. But British opposition has been a major stumbling block.

The outline of the tax said the burden should be shared equally between EU resident counterparties.

“When one of the transaction counterparties is not located in the EU, the party established in the EU should be responsible for the payment of the whole amount,” it read.

“However, EU residents should be authorised to pay only half the tax rate on transactions with counterparties that also impose an FT, subject to a fiscal cooperation agreement.”

EU Tax Commissioner Algirdas Semeta said on Thursday he would propose in early October a tax on trading shares and bonds. He believes a 0.1 percent tax on a stock or bond trade and a 0.01 percent levy on derivatives trades would be low enough so as not to trigger avoidance measures.

An EU official said the plan would proceed for the 17-nation euro zone if Britain remained opposed.

A transaction or Tobin tax, named after the U.S. economist who came up with the idea in the 1970s, has been mooted at regular intervals to raise funds, but has always struggled to get off the drawing board because it is easy to avoid unless all countries impose it. (Additional reporting by Huw Jones and Sven Egenter in London; Editing by David Holmes)

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