The European Commission has confirmed its support of a plan by 10 EU countries to apply a financial transaction tax (FTT) through enhanced cooperation with claims that the tax can raise billions of euros of much-needed revenue for member states and will create a stronger, more cohesive single market.
The 10 countries are France, Germany, Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
They decided to push on with the introduction of an FTT, which was first proposed by the Commission in September 2011, after it failed to win unanimous support among the EU's 27 member states in June.
The Commission has concluded that all legal conditions are met and that the member states that want to move ahead with an EU FTT should be allowed to do so.
It believes the FTT, despite vehement opposition from other member states such as the UK, could raise billions of euros needed to get the euro zone out of the financial crisis it is in.
José Manuel Barroso, president of the Commission said: 'I am delighted to see that 10 member states have indicated their willingness to participate in a common FTT along the lines of the Commission's original proposal. This tax can raise billions of euros of much-needed revenue for member states in these difficult times.'
The Commission also claims that the implementation of the FTT would create a stronger single market and benefit EU members across the board.
Algirdas Aemeta, commissioner for taxation, said: 'There are EU wide benefits to a common FTT, even if it is not applied EU wide. It will create a stronger, more cohesive Single Market and contribute to a more stable financial sector.'
However, some still argue that the FTT will have detrimental effects on jobs and growth in Europe. Opponents say that it will add to the problems of the financial sector, raising the costs of funding and leading. The fact that the FTT is not being universally levied, even within the eurozone, means it will be possible to avoid the tax.
Ash Saluja, financial services partner with law firm CMS Cameron McKenna said: 'It is hard to see how an agreement between 10 EU member states can be said to improve the functioning of the single market as a whole. If anything, this latest development could drive a wedge between those countries that want the FTT and those that don't. One also wonders how much revenue this will actually generate in practice, given that many of the financial groups at whom the FTT is targeted may be able to sidestep it by doing business in jurisdictions that do not impose such taxes.'
The rate or scope of the tax has not yet been determined, although it has previously been proposed by the European Commission to have a 0.1% tax on share and bond transactions, and a 0.01% tax on derivatives.
The proposal must be adopted by a qualified majority of member states, and receive the Parliament's consent, in order for the 10 member states to move forward. The Commission intends to table the substantive proposal on the FTT, for discussion and adoption by the participating member states later in the year.
