By Joseph Alan: Subscribe to Joseph's RSS feed
September 28, 2011 10:41 AM EDT
The European Commission (EC) announced on Wednesday that the European Union has proposed a financial transactions tax that is set to take effect in 2014.
In a statement released to Bloomberg, the EC said the plan will lay down minimum tax rates for financial transactions throughout the 27-nation EU.
It would review the trading of stocks and bonds with a 0.01 rate for derivatives contracts.
The announcement came in the wake of a proposal in 2010 that failed to obtain the nod of member-nations.
The global financial sector claims this tariff would affect the international economy since banks will naturally pass on costs to clients.
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Earlier, UK Business Secretary Vince Cable told Bloomberg that "taxation is a national competence issue and recommendations of the EU for a toll on financial transactions cannot be made mandatory on the UK."
It was learned that the tax is intended for investment companies, banking institutions, insurance agencies, stockbrokers, pension funds, hedge funds and other corporate organizations.
The EU wants to protect domestic units and small businesses from this tax and that banks cannot impose unwarranted fees on a 10,000 euro stock purchase.
The tax will "make certain that the financial sector makes a reasonable contribution at a time of financial consolidation," the EC statement said.
Member-states of the EU are expected to deliberate on the proposal prior to the presentation of the plan by the commission to the Group of Twenty nations in a forthcoming summit this Nov.
The impact assessment complementary to the proposal says that the plan will have a long-run negative effect of 0.5 percent of the gross domestic product.
The tax will certainly have an outcome on "market behavior and financial sector business models," according to the EU.
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