ANN CAHILL: Levy could raise up to €25bn from ‘under-taxed’ EU banks

BANKS are under-taxed in the EU, but new proposals to levy their activities could raise as much as €25 billion a year, the European Commission says.

Their study rules out a Financial Transactions Tax because although they estimate it could raise between €60 billion and €600bn globally, it would have to be applied by every country in the world.

Instead Taxation Commissioner Algirdas Semeta believes that a tax on financial activities could be imposed throughout the EU without placing Europe’s banks at a competitive disadvantage with the rest of the world.

He points out that the financial sector was a major cause of the financial crisis and has received substantial government support over the past few years.

As a result it should contribute to the cost of re-building Europe’s economies and bolstering public finances.

A tax of 5% on their activities would also complement regulatory measures, including a bank levy and resolution fund which are also being considered.

The FAT (financial activities tax) would be a tax on profit and wages or it could specifically target economic rents and or profits gained through riskier activities of all financial corporations.

The proposal does not suggest how the revenue could be used.

“Only after that is agreed could it be feasible to discuss how revenues from such a tax could be used,” said Commissioner Semeta.

A number of studies carried out by the Commission and by others suggest that the financial sector is under-taxed compared to other sectors. Financial services are exempt from VAT due to the difficulties in measuring the taxable base.

The commissioner said that they also took into account the privileged position the financial sector enjoys in the economy compared to other sectors, the fact that it has benefited from economic rents and the implicit protection it has received from governments.

The proposals will be discussed by EU finance ministers at their meeting later this month and by the EU leaders at the end of the month.


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