Europe looks set to shrug off US objections and go it alone with a financial transactions tax, an EU source said today, with Brussels due to imminently release proposals likely to raise a storm even within the bloc's ranks.
The European Commission today approved in principle the tax proposal, and the head of the EU executive Jose Manuel Barroso may outline the plan tomorrow in an address to the European parliament in Strasbourg.
On the commission's drawing-board for more than a year, the idea was given fresh impetus last month when given the nod by French President Nicolas Sarkozy and German Chancellor Angela Merkel.
"The idea is to force a contribution from the financial sector, which enjoys fiscal privileges thanks to a sales tax exemption, meaning it saves €18 billion a year in Europe," an EU source said.
If adopted - not before 2014 - the tax could ring in between €30-50 billion a year - possibly half for the European Union budget, the remainder for national governments. The rate suggested would be minimal with member states free to hike the tax.
The financial transactions tax is slated to target a wide field, with the latest known proposals aiming to slap 0.1% on shares and bonds and 0.01% on derivatives.
While Merkel and Sarkozy offered no details on the tax in August, their support helped send shares into an immediate tailspin with financial sector players warning the measure would push business away from Europe.
Britain, at the heart of the financial industry, reiterated demands for any such tax to be applied globally. "Otherwise the transaction covered would simply relocate," a Treasury spokesperson said.
But a source close to experts drafting the proposals said the research on the issue was "reassuring", with negative impact deemed "negligeable" when compared with Europe's overall attraction to financial transactions. The tax, the source added, would include a principle of territorial location to avoid relocation.
"A non-European bank registered in Europe for certain transactions could be considered to be established in Europe. The tax would not be based on where transactions take place but on the parties involved,'' he explained.
With Britain and the Netherlands opposed to the plan, the 27 members of the EU are expected to fail to unanimously agree on the new tax. The commission could then suggest adopting it in the 17-nation euro zone.
The target date for introduction is 2014 as a proposal will need at least nine months of talks and around a year for member states to enact. A recent poll showed more than 60% of Europeans in favour of a financial transactions tax, with support on the increase in 22 EU nations since 2010.
