An EU Commission proposal to introduce a new tax on EU financial transactions faces a tough road to passage, according to a Credit Suisse internal report.
The bank said they were “sceptical” the transaction or Tobin tax – named after economist James Tobin who first proposed the idea in the 1970s – would be implemented due to fragmented support amongst EU member-states. Introduced under Article 113 of the Treaty of Rome, the tax would require unanimity of all EU members to gain approval, said Mark Stapleton of law firm Dechert.
As such “there is a chance that the proposals are adopted by a more limited range of countries or are modified substantially from here,” said Credit Suisse.
The tax, which would apply to all financial transactions where at least one party to the deal was located in the EU, would raise an estimated €57 billion every year, according to Commission estimates.
In an email exchange, the UK government reaffirmed its stance that the tax would find its support only if applied at the global level. The fear is the tax would incentivise covered transactions to leave London for more tax-friendly financial centres. Similarly both the US and Canada have expressed their distaste of the tax.
The commission will present its proposals at a G20 summit this November.
If passed, “the tax would cover the purchase and sale of any financial instrument so, for example, would hit transactions by private equity fund managers when purchasing or selling shares, bonds or options in portfolio companies”, said Stapleton.
EU tax commissioner Algirdas Šemeta said he had “no doubt this tax can deliver what EU citizens expect; a fair contribution from the financial sector,” adding he expects other G20 nations to follow suit in adopting the Tobin tax.
The Commission is proposing the tax come into effect from January 2014.