The European Commission last week backed away from pushing for a Europe-wide “Robin Hood tax” – to the disappointment of socialists in the European Parliament and the anger of trade unions across the continent.
Instead, the Commission’s communication suggests a financial activities tax on the profits and remunerations of financial sector companies which it claims could generate revenue and help to stabilise financial markets “without posing undue risk to EU competitiveness”.
EU Taxation Commissioner Algirdas Semeta said the Commission still supports the idea of a Robin Hood tax if applied at global level.
He said: “I am fully committed to campaigning for a financial transaction tax internationally, and the Commission will continue to work hard within the G20 to reach agreement on it.”
But with the United States, as well as the City of London, strongly opposed to such a measure, there is little hope now, despite an apparent worldwide appetite for such a move, that a Tobin tax will end up on the statute books.
The European Commission’s new proposal came after warnings from European Central Bank president Jean-Claude Trichet that a Robin Hood tax for the European Union could damage Europe economically by driving out financial trading, although such fears have been dismissed by Labour MEPs.
And the European Trade Union Confederation reacted with fury, dismissing the proposals as “unsatisfactory, unambitious and unacceptable” and condemning the EU for abandoning “the proven feasibility of financial transaction taxes” which could raise more than £150 billion annually, in favour of the “much weaker financial activities tax” with potential revenues of just £20 billion.
“This comes close to letting finance get away with expropriating the taxpayer”, said ETUC general secretary John Monks. The Commission’s proposals will go to European leaders for approval at the forthcoming summit at the end of the month, while the EU will present its plans for financial sector taxation at the next G20 in November.
A Commission budget review in the near future will also examine the controversial question of whether Europe should be able to raise its own direct tax revenues, independent of contributions from member states.
In the meantime, recommendations from a government-appointed commission in Switzerland that banks considered to be “too big to fail” should increase their capital ratio to avoid the risk of unmanageable losses, could also have an impact in Britain.
Experts say Credit Suisse and UBS need to up their total capital ratio to 19 per cent, compared with an international requirement of 10.5 per cent. Economists reckon leading British banks would need to raise an extra £200 billion to meet equivalent standards.
