Friday, March 12, 2010
In a recently adopted resolution, the European Parliament has emphasized the need to develop plans for a global tax to discourage excessive risk-taking by financial institutions and to ensure that the financial industry pays for damage caused by the financial crisis.
According to a recent European parliamentary statement, European Members of Parliament (MEPs) have stated that, if a worldwide tax proves unachievable, the European Union (EU) could consider the option of going it alone.
Parliament has asked the Commission to develop the transaction tax plan in time for the EU to present a common position to the G20 in June, and to assess how such a tax could help stabilize financial markets and prevent a similar crisis by targeting "undesirable" transactions. The resolution states that these “undesirable” transactions should be specifically identified by the Commission.
The Commission and Council are also urged to examine how the tax could be used to finance development cooperation and to help developing countries to combat climate change, as well as how the tax could contribute to the EU budget.
Although MEPs favour a global approach through the G20, they are eager to evaluate the advantages and disadvantages of introducing a purely EU-wide tax, even if the EU's main partners do not introduce such a tax.
The resolution underlines the fact that: “Any such tax must not harm the banking system's ability to perform its vital role of financing real economy investments, and must not encourage the migration of capital”. Negative repercussions on small businesses and individual investors must be avoided."
According to Economic and Monetary Affairs Committee MEP Edward Scicluna, the resolution “is not advocating one model or another, but aims to launch work on many questions that need answering”, adding that "there are as many advocates for this tax as there are detractors", and impact assessments would be needed.
Replying for the Commission, Tax Commissioner Algirdas Semeta said it believed that the issue is best tackled at global level, since this is the only way to prevent capital flight. He also said that the Commission was considering regulating the financial industry by means of such a tax and that without a well-defined distributive mechanism, the revenue generated could end up in those few countries with large financial centres.
The resolution on a financial transaction tax was approved with 536 votes in favour, 80 against and 33 abstentions.