11 EU member states have suggested the so called ‘Robin Hood’ tax on financial transactions. The tax is aimed at financial transactions between financial institutions charging 0.1% against the exchange of shares and bonds and 0.01% across derivative contracts. However, the UK government has expressed a negative stance towards it.
This contentious tax will be discussed for the first time at ministerial level in February 2014. There will be a meeting of the EU Economic and Financial Affairs Council under Greek Presidency of the EU.
11 EU member states, including Greece, supported the introduction of a financial transaction tax through the use of the so called EU enhanced cooperation procedure which is used when unanimity cannot be reached but member states still want to further a proposal.
However, the UK doesn’t support this measure. The opposition stance has been expressed by chancellor George Osborn who claimed that the proposition for this tax is not well designed, nor coming in the right time.
Furthermore, another influential figure that stated his negative view on the proposal is the chief executive of the Law Society, Desmond Hudson. He wrote a letter to European finance ministers in which he wanted to show that this proposal does not adequately respect the rights of the countries who chose not to participate. The problem is with the structure of the financial transaction tax. Financial entities which are based in non-participating countries (such as the UK) would still be required to pay this tax under a broad range of transactions. This includes even such transactions that do not have an actual economic link to a participating member state. Hudson emphasized on the fact that those 11 countries who chose to introduce the financial transaction tax can do so but any form of legislation should respect the decision of the majority of EU countries not to participate. The way the tax is designed to work will indirectly force a certain amount of participation by those countries.
Thus, the tax will depart from the ordinary regulation where each party to a transaction holds responsibility only for their own liabilities.
The European Commission has proposed that each leg of a transaction should be a subject to the tax and that each party is jointly or severally liable to pay. In other words, the costs will be much higher. So it is a matter of time to see how things will turn around.