Thursday

28th Mar 2024

EU suggests €50 billion bank tax idea

  • Sweden already operates a national levy on banks (Photo: alancleaver)

The European Commission has published a study which suggests a new tax on banks could generate as much as €50 billion a year for EU governments, whose public finances have been left in tatters following the recent financial crisis.

The EU tax on bank leverage and risk-taking is just one of several "innovative financing options" in the commission document, published on Tuesday (6 April), with the region's finance ministers set to mull over the list at an informal meeting in Madrid this month.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

As well as helping governments improve their balance sheets, the fresh revenue could be used to fund future bank bail-outs, climate change and development goals, say the report's authors, with Germany and France broadly in support of the plans.

"The financial sector needs to contribute to the costs of financial stability. This should be one of the building blocks in our effort to set up a crisis management framework in Europe," Michel Barnier, EU commissioner for internal market and services, said in a statement.

The EU is keen to come up with a common position on innovative financing ahead of a meeting of G20 leaders in Toronto this June, with the US administration announcing plans in January to tax risky assets held by the country's large financial firms in a bid to pay for recent multi-billion dollar bail-outs.

Sweden already operates a bank levy system. The commission report calculates that "if the Swedish tax rate of 0.036 percent is applied, the revenue would be around €13 billion in 2009." However, if the US tax rate of 0.15 percent were used, this "would lead to revenue of more than €50 billion."

The new study, called for by EU leaders at a summit in October 2009, also looks at the possibility of a tax on global financial transactions, suggesting this could yield up to €20 billion.

Together with the considerable fundraising potential, the EU executive body stressed that the measures could provide a "double dividend," also helping to improve market stability by putting a price on risk-taking in the financial sector.

"Schemes aimed at pricing leverage and risk-taking in the financial sector could raise substantial revenues while limiting undesirable behavior by financial institutions and could be administered at a reasonable cost," says the report.

Financial taxes are nothing new, with US economist James Tobin first putting forward the idea of a tax on global currency transactions as early as 1972 as a means of combating market volatility.

But since then economists and politicians have underlined the need for a worldwide agreement if such schemes are to work effectively and not simply send financial activity to non-cooperating jurisdictions.

The commission report repeats the need for global agreement but adds that "even in the absence of proper international coordination, an EU initiative on the matter could be explored."

The difficulties in co-ordinating European and American initiatives were once again brought to the world's attention this week, with US treasury secretary Tim Geithner repeating his concerns that EU plans to regulate hedge funds could "discriminate" against US fund managers.

EU supports bank levy plans in G20 letter

The European Union has indicated it is ready to work with the Group of 20 leading economies in constructing a global framework for taxing banks.

'Swiftly dial back' interest rates, ECB told

Italian central banker Piero Cipollone in his first monetary policy speech since joining the ECB's board in November, said that the bank should be ready to "swiftly dial back our restrictive monetary policy stance."

Opinion

EU Modernisation Fund: an open door for fossil gas in Romania

Among the largest sources of financing for energy transition of central and eastern European countries, the €60bn Modernisation Fund remains far from the public eye. And perhaps that's one reason it is often used for financing fossil gas projects.

Latest News

  1. German bank freezes account of Jewish peace group
  2. EU Modernisation Fund: an open door for fossil gas in Romania
  3. 'Swiftly dial back' interest rates, ECB told
  4. Moscow's terror attack, security and Gaza
  5. Why UK-EU defence and security deal may be difficult
  6. EU unveils plan to create a European cross-border degree
  7. How migrants risk becoming drug addicts along Balkan route
  8. 2024: A Space Odyssey — why the galaxy needs regulating

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us