European Union leaders have been put under increased pressure to introduce a financial transaction tax after MEPs voted by a large majority in favour of the idea. A report adopted by the European Parliament today, by 487 votes to 152, urged member states to go ahead with the controversial plans even if not all EU countries took part.
The parliament has only an advisory role on tax policy, and for the levy to be implemented it would have to be agreed unanimously by member states in the European Council. But MEPs have sent a signal that the FTT has broad support, said Sirpa Pietikäinen, a member of the centre-right European People's Party. She added that it was "only fair that the financial sector participates more in carrying the burden of this devastating financial crisis".
The proposal, which was put forward by the European Commission last year, envisages a 0.1 per cent levy on transactions involving shares and bonds, and 0.01 per cent on derivatives, with pension funds the only sector exempted. In parliament, MEPs voted in favour of alterations to the plans to make it more difficult for financial institutions to avoid the tax and increase the penalties for evasion. The commission has predicted that an FTT could raise about €55bn a year, with the revenues potentially spent on growth-enhancing policies, as well as projects designed to tackle climate change and international development.
"This is a big success and a great achievement," said Anni Podimata MEP, from the Socialists and Democrats group, who steered the report through parliament. "The revenues it will bring can help boost growth and job creation and be used to finance investments in the green economy without deepening public debt or deficits. Such a tax would also reduce the risks of another financial crisis. It will make the financial sector more stable, less short-termist and more focused on financing the real economy."
Sven Giegold, finance spokesman for Green MEPs, said it was an "important landmark" towards an FTT, which would "curb risky financial speculation and generate much needed revenue for under pressure exchequers". And Jürgen Klute, from the European United Left/Nordic Green Left group, described it as a "signal to send to citizens, markets and banks following a series of campaigns and petitions aimed at introducing the FTT".
Oxfam is among those to have campaigned for the introduction of the tax. The charity's EU policy adviser Nicolas Mombrial, referring to tonight's meeting of EU leaders in Brussels, said they "cannot afford to ignore this overwhelming vote in favour of an EU-wide tax on financial transactions". He noted that recent polls had showed that two-thirds of European supported the introduction of an FTT, widely known as a Robin Hood tax.
While MEPs in parliament supported the proposal by a large majority, it has provoked mixed reactions among member states, with council president Herman Van Rompuy describing it as "difficult issue" in a letter to EU leaders this week. A number of countries, notably the United Kingdom and Sweden, oppose the idea, warning that it would drive investment out of Europe unless it was applied globally. However, Van Rompuy said member states "should not shrink from exchanging views" and urged them to find a "pragmatic way forward". New French president Francois Hollande is among those to support the implementation of the tax.
The commission was among those to welcome the positive vote in parliament, saying the introduction of an FTT would "help rebuild the damaged relationship between the financial sector and the ordinary citizen". Tax commissioner Algirdas Šemeta added: "Banks and financial institutions received – and continue to receive – massive support from the public sector to overcome the crisis. It is not unreasonable to expect them to contribute, in the same way as other sectors, to our collective recovery."
Šemeta said the levy would "not ask more of the everyday taxpayer", but that claim was disputed by influential British liberal MEP Sharon Bowles, who chairs the parliament's economic and monetary affairs committee and voted against the proposal. "The burden of this tax does not fall on banks," she said. "It will be ordinary people who foot the bill in price rises and steeper insurance costs. Anyone who tries to pretend otherwise is simply being an opportunist." Bowles said she was "all for making banks pay their fair share" but that people would be "pretty angry" to find that an FTT meant they had to pay more.
A series of British MEPs lined up to slam the proposal. Marina Yannakoudakis, a Conservative, said the FTT would "damage growth and cost jobs", adding that it would effectively be a tax on the City of London, which is dominated by the financial services sector. Her party colleague Kay Swinburne warned that the tax was a "distraction" from the work that needed to be done to make financial markets safer. And UK Independence Party MEP Godfrey Bloom
said the result of the vote showed that the only way to protect Britain's financial interests was to "withdraw from the tax-hungry EU and stop giving Brussels power over us".
It was not only British MEPs that were critical. Ivo Strejcek, a Czech member of the European Conservatives and Reformists group, said his colleagues in parliament "seem to think money grows on trees and that a tax can be raised without adverse consequences for the economy". He predicted that the "highly mobile" financial sector would "either relocate to an FTT-free zone, or it will trade in riskier products, thus increasing market volatility".