Eurocrats back new tax on City

Eurocrats back new tax on City THE European Parliament voted yesterday to slap a Tobin tax on all financial transactions that pass through Europe, in a bid to raise €200bn (£172bn) for EU?spending. The tax would disproportionately hit the City, Europe’s financial capital, at a time when banks are struggling to build up their capital bases. The EU?Parliament said the proposal, to impose a 0.05 per cent tax on “every type of transaction” at EU-level, is aimed to “help finance budgets, reduce public deficits and fight speculation”.The EU is keen to find new ways to raise cash for itself and sees the region’s banks as a ripe target for extra revenue-raising, claiming the tax would make the industry pay for the crisis.The vote would require the consent of member states to become law, but the margin by which it passed – 529 to 127 – will force the European Commission to draw up plans for its implementation.“We want to send out an institutional signal saying that the private sector bears its part of the responsibility for the crisis,” said German MEP Martin Schulz.Critics fear the charge, dubbed a “Robin Hood tax” by supporters, will drive capital flows outside the EU.The CBI’s Brussels director, Sean McGuire, said: “It would hamper the EU’s long-term competitiveness as a leading centre for financial services companies, and ultimately have a negative impact on jobs and growth.” He added that the tax would also be passed on to consumers.The British Bankers’ Association said: “It would require simultaneous worldwide application to succeed, otherwise the business would simply migrate elsewhere, along with the jobs, the tax revenues and the rest.”The transaction tax vote comes a day after the EU Parliament’s Economic Affairs Committee passed a motion to ban trading of naked credit default swaps (CDS) on sovereign debt and to force traders to settle naked short sales at the end of each day.The measures, which must be negotiated by European finance ministers, would mean that traders could not buy CDSs to insure sovereign debt that they did not own.“They’re trying to say hedging is OK but speculating isn’t,” said an industry source. “But if they ban naked trading, there’ll no one for the worthy hedgers to trade with. They’ll dry up the market.”A naked trade is a bet on a derivative where the trader does not own the underlying asset. whatsapp KCS-content Tuesday 8 March 2011 9:22 pm Share Show Comments ▼ whatsapp Tags: NULL

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