EU states to get go-ahead for tax on trading

Mon Jan 21, 2013 6:30pm EST
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By John O'Donnell and Robin Emmott

BRUSSELS (Reuters) - Germany, France and nine other euro zone countries will get the go-ahead on Tuesday to start work on a financial transactions tax, a measure likely to unsettle banks and trading houses but which will please voters and could raise much-needed revenue.

European Union finance ministers are expected to give their approval at a meeting in Brussels, allowing 11 states - Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia - to start preparations for imposing a tax on all financial market transactions.

The levy, based on an idea proposed by U.S. economist James Tobin more than 40 years ago but largely ignored until now, is symbolically important in showing that politicians, who have fumbled their way through five years of financial crisis, are getting to grips with the banks blamed for causing it.

Some believe that the tax could raise up to 20 billion euros a year, although estimates vary widely.

"There is sufficient support from ministers ... and it looks likely they will allow the 11 to go ahead with enhanced cooperation on a financial transactions tax," said one diplomat.

Under EU rules, a minimum of nine countries can cooperate on legislation without all member states using a process called enhanced cooperation, as long as a weighted majority of the EU's 27 countries give their permission.

Germany and France decided to push ahead with a smaller group after efforts to impose a tax across the whole EU and later among just the 17 euro zone states foundered. Sweden, which tried and abandoned its own such tax, cautioned that the levy would push trading elsewhere.